UK Trade & Investment

International Business Strategies, Barriers & Awareness Monitoring Survey 2011

Research Report

May 2011

JN: 4271 Contents

01. Executive Summary ........................................................................................................ 1 1.1 Introduction ............................................................................................................. 1 1.2 Summary Results .................................................................................................. 2
02. Introduction .................................................................................................................... 10
03. Research Objectives ..................................................................................................... 11
04. Methodology .................................................................................................................. 12 4.1 Coverage .............................................................................................................. 12 4.2 Sample Design ..................................................................................................... 12 4.3 Questionnaire Design .......................................................................................... 14 4.4 Fieldwork ............................................................................................................. 14 4.5 Analysis & Weighting .......................................................................................... 15 4.6 Core vs. Boost Sample – Profile Differences ..................................................... 19
05. Modes of Internationalisation ....................................................................................... 20 5.1 Modes Used ......................................................................................................... 20 5.2 Number & Type of Overseas Sites ....................................................................... 22 5.3 ‘Web Only’ Exporters .......................................................................................... 24 5.4 Importing .............................................................................................................. 26 5.5 Internationalisation Modes by Firm Profile ....................................................... 27 5.6 Number of Modes Used ....................................................................................... 31 5.7 Order of Setting Up Overseas Sites ..................................................................... 33 5.8 Reasons for Operating Overseas Sites ............................................................... 35
06. Profile ............................................................................................................................ 56 6.1 Age of Business .................................................................................................... 56 6.2 Size of Business (Employees) ............................................................................. 58 6.3 Size of Business (Turnover) ............................................................................... 60 6.4 Industry Sector ..................................................................................................... 62 6.5 Ownership ............................................................................................................ 64 6.6 Experience of Doing Business Overseas ............................................................ 65 6.7 Innovation ............................................................................................................. 83 6.8 Growth .................................................................................................................. 90 6.9 Business Planning ............................................................................................... 98 6.10 Customer Types .................................................................................................. 100 6.11 Profile of UKTI Users: Internationalisation Survey vs. PIMS ......................... 102
07. Awareness & Usage ....................................................................................................... 104 7.1 Awareness & Use of UKTI .................................................................................... 104 7.2 Awareness & Use of Business Link ..................................................................... 109
08. Drivers of Market ........................................................................................................ 112 8.1 Drivers of Market (Summary) ........................................................................ 112 8.2 Drivers of Market (Detailed) ........................................................................ 116
09. Barriers to Overseas Trade .................................................................................. 119 9.1 Barriers (Summary) ...................................................................................... 119 9.2 Barriers (Detailed) ...................................................................................... 135 9.3 The Role Of Overseas Sites In Avoiding Barriers ........................................ 148
10. Benefits of Doing Business Overseas ............................................................... 150 10.1 Benefits ...................................................................................................... 150 10.2 Impact on Product & Service Development .............................................. 158 10.3 Impact of Overseas Sites on UK Employment Levels .............................. 169
11. Opportunities in Emerging & Fast Growing Markets ...................................... 174 11.1 Opportunities in Emerging & Fast Growing Markets .............................. 174 11.2 Influence of Economic Downturn .............................................................. 179
12. Difficulties Accessing Finance .......................................................................... 182
13. Marketing Channels ............................................................................................ 185 13.1 Channels Used ............................................................................................ 185 13.2 Usefulness .................................................................................................. 188 13.3 Social Networking Sites ............................................................................. 191

Annex A – Markets Selected (For Drivers & Barriers Questions)

Annex B – Questionnaire

1. Executive Summary

1.1 Introduction

This research gathers evidence about trends in UK businesses’ international business strategies, barriers hindering such business, awareness and usage of UKTI, and related issues.

In terms of the specific research aims, the study was required to provide robust evidence to:

- Help understand the role of international market diversification in business development strategies;
- Identify drivers of geographical focus;
- Identify links between innovation, R&D and overseas business development, including links between innovation and mode of market entry;
- Understand the barriers encountered by UK businesses in seeking to develop overseas business, including the role of market entry mode in overcoming such barriers;
- Measure awareness and use of UKTI support;
- Identify the extent to which credit conditions and related issues are impacting on firms’ overseas business development;
- Provide evidence on the characteristics of users and non-users of UKTI.

This summary outlines the key findings from this study. Please note that all of the data in this report has been weighted by age of firm to reflect a disproportionate stratified sampling approach. 1.2 Summary Results

1.2.1 Internationalisation Modes

Firms were asked which of a number of internationalisation modes they had been involved in over the last five years (or were planning to do in the next year in the case of those that were not yet doing any business overseas(^1)).

| Table 1.2.1 Modes Of Internationalisation | |------------------------------------------| | **Total** | **UKTI Usage** | **UKTI User** | **Non-User** | | **Base** | 903 | 248 | 655 | | **Different Modes Used** | | | | | Selling direct | 87% | 88% | 86% | | - 'Web only' exporters | 4% | 1% | 5% | | Agents/distributors | 41% | 54% | 36% | | Contractual arrangements | 11% | 12% | 11% | | Overseas site | 11% | 17% | 8% | | - Manufacturing/assembly | 3% | 5% | 2% | | - Call centre | 1% | 0% | 1% | | - Sales/service delivery | 9% | 14% | 7% | | - R&D | 2% | 4% | 2% | | Importing | 56% | 64% | 52% | | **Number of Modes Used** | | | | | One | 63% | 48% | 68% | | Two | 27% | 36% | 24% | | Three | 8% | 13% | 7% | | Four | 2% | 3% | 1% |

The vast majority of internationalising firms sell direct to businesses or individuals overseas, and two-fifths use agents or distributors. However, only around 1 in 10 are involved in other ‘contractual arrangements’ (such as licensing or franchising) or operate their own overseas sites.

A small minority of internationalising firms are ‘web only’ exporters, in the sense that they do not sell overseas through any other channel and do not use any other internationalisation modes (e.g. selling through agents and distributors).

Whilst the proportion selling direct is identical for users and non-users of UKTI services, the former are significantly more likely to sell through agents or distributors and operate their own overseas sites. The same is true of larger firms, innovative firms, those active in more overseas markets and those that plan to grow ‘substantially’ over the next 5 years.

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(^1) Please note that 61 of the 903 firms interviewed (7%) were not yet doing business overseas but qualified for the research on the basis that they were planning to do so in the next year. 1.2.2 Profile

The table below provides key profile information for internationalising firms, including comparisons between users and non-users of UKTI.

| Profile | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 903 | 248 | 655 | | Age | | | | | 0-5 years | 17% | 12% | 19% | | 6-10 years | 23% | 24% | 23% | | Over 10 years | 60% | 64% | 58% | | Size (employees) | | | | | 0-9 employees | 56% | 45% | 60% | | 10-249 employees | 40% | 47% | 36% | | 250+ employees | 3% | 7% | 2% | | Sector | | | | | Primary | 0% | 0% | 0% | | Production | 34% | 46% | 29% | | Construction | 1% | 1% | 2% | | Services | 64% | 53% | 69% | | Innovation | | | | | Innovative | 72% | 86% | 66% | | Innovative (alternative) | 47% | 64% | 40% | | IP active | 23% | 38% | 17% | | Overseas experience | | | | | Less than 2 years | 17% | 12% | 20% | | 2-10 years | 40% | 40% | 41% | | Over 10 years | 42% | 48% | 39% | | Number of markets | | | | | Up to 5 markets | 47% | 31% | 53% | | 6-10 markets | 20% | 24% | 18% | | Over 10 markets | 33% | 45% | 28% | | Growth objectives (next 5 years) | | | | | Grow substantially | 28% | 29% | 27% | | Grow moderately | 54% | 58% | 52% | | Same/smaller | 15% | 12% | 17% | | Business plan | | | | | Yes | 59% | 74% | 52% | | No | 38% | 25% | 43% |

In terms of their general characteristics, UKTI users have a slightly older and larger profile than non-users. They are also more likely to be operating in the production sector.

Perhaps the most notable differences between users and non-users of UKTI services are in the area of innovation. The former are significantly more likely to be classed as ‘innovative’ (by both definitions) and as ‘IP active’ (i.e. they hold some form of legal protection for any of their products or services).

UKTI users also tend to have been doing business overseas for longer and, more notably, operate in a significantly greater number of markets. They are also a little more ambitious in their growth objectives and are more likely to have a current business plan, suggesting that they take a more strategic approach to the development of their business. 1.2.3 Awareness & Usage of UKTI

Firms were asked whether they had heard of either UK Trade & Investment or the commercial services provided by British embassies and consulates overseas, and whether they had used either of these.

| Table 1.2.3 Awareness & Use of UKTI | |-------------------------------------| | **2011 Survey** | | **Base** | | Total | | 903 | | UKTI User | | 248 | | Non-User | | 655 | | **Aware (at least one)** | | 71% | | UK Trade & Investment or UKTI | | 53% | | Commercial services provided by embassies and consulates overseas | | 56% | | Used (at least one) | | 29% | | UK Trade & Investment or UKTI | | 22% | | Commercial services provided by embassies and consulates overseas | | 18% | | **2010 Survey** | | **2008 Survey** | | 902 | | 900 | | 68% | | 68% | | 51% | | 51% | | 53% | | 55% | | 27% | | N/A | | N/A | | N/A | | N/A |

There is some evidence to suggest that awareness of UKTI (including the services provided by overseas posts) has increased recently, from 68% in 2008 and 2010 to 71% currently. However, it should be noted that this apparent difference is not statistically significant. Similarly, there has been a slight (but not significant) rise in usage of UKTI, to 29%.

Awareness of the UK Trade & Investment name itself stands at 53%, slightly lower than the awareness levels seen for the commercial services provided by overseas posts. It is interesting to note that only 87% of UKTI users have actually heard of ‘UK Trade & Investment’ (i.e. 13% have used the services provided by overseas posts but not realised the link to UKTI).

Amongst non-users of UKTI overall awareness stands at 60%, indicating that there are a significant number of internationalising firms that could benefit from UKTI’s services but have never heard of the organisation.

Awareness and usage levels increase amongst larger firms and those with more experience of doing business overseas. It is also clear that innovative and IP active firms are more engaged with UKTI, with awareness and usage levels significantly higher amongst these groups. Awareness and usage of UKTI are particularly high amongst ‘innovative high growth’ firms (at 81% and 34% respectively), which is encouraging given that this is a key group for UKTI to reach. 1.2.4 Barriers to Overseas Trade

Firms were asked to identify the ‘most challenging’ overseas market in which they had done business over the last 5 years, and were then read out a number of potential difficulties and asked to indicate the extent to which they had encountered each one in this market. These were then combined into 7 summary barriers, and the table below shows the proportion of firms experiencing ‘significant’ difficulties with each one.

Table 1.2.4 Summary Barriers

| Base: All exporters | Total | UKTI Usage | |---------------------|-------|------------| | | | UKTI User | Non-User | | At least one significant barrier | 67% | 83% | 61% | | - Legal & regulatory barriers | 43% | 51% | 40% | | - Customs barriers | 24% | 30% | 21% | | - Contacts barriers | 33% | 46% | 27% | | - Information barriers | 16% | 18% | 14% | | - Resource barriers | 20% | 29% | 17% | | - Language & cultural barriers | 18% | 23% | 15% | | - Bias barriers | 19% | 26% | 16% | | No significant barriers | 33% | 17% | 39% |

Two-thirds of internationalising firms have experienced at least one significant barrier in their selected market, confirming that there is a clear need for external assistance to help firms overcome these barriers and successfully trade overseas. Reflecting the results from previous UKTI studies, legal and regulatory barriers and contacts barriers are highlighted as being the most prevalent issues (experienced by 43% and 33% of firms respectively).

UKTI users encounter more significant barriers than non-users, with 83% experiencing at least one, compared to just 61% of non-users. Users are more likely to encounter each of these types of barrier (although please note that this difference is not statistically significant for ‘information barriers’).

More experienced exporters, innovative and IP active firms and those using less advanced internationalisation modes (i.e. not just selling direct to customers) are all more likely to experience significant barriers to overseas trade. It is also clear that firms are more likely to encounter barriers when targeting high growth markets or other markets outside of the EEA.

Given that UKTI users are more likely to meet all of the above criteria (e.g. more experienced exporters, innovative, etc) the differences in the barriers experienced by users and non-users could just be a function of their different profile. However, when further analysis is conducted on a like-for-like basis by comparing firms that operate in the same number of markets and comparing those answering about the same ‘type’ of market (e.g. high growth), the difference between users and non-users is still very evident. This suggests that there is a ‘true’ distinction between users and non-users and that the increased likelihood of users reporting barriers is not just a result of UKTI users operating in a greater number of markets and/or more challenging markets. 1.2.5 Benefits of Doing Business Overseas

All firms were read out a number of possible benefits of doing business overseas and asked to indicate the extent to which each one applied to them. The table below shows the proportion benefiting significantly from each one.

Table 1.2.5.1 Summary Benefits

| Benefit | Total | UKTI Usage | |----------------------------------------------|-------|------------| | | Base | UKTI User | Non-User | | At least one significant benefit | 63% | 75% | 58% | | - Level of growth otherwise not possible | 41% | 56% | 36% | | - More fully utilising capacity | 36% | 49% | 31% | | - Exposure to new ideas | 31% | 41% | 27% | | - Increased lifespan of products/services | 30% | 35% | 28% | | - Improved profile or credibility | 44% | 57% | 39% | | No significant or moderate benefit | 19% | 9% | 23% |

The most widespread benefit of exporting is that it improves firms’ profile or credibility, followed by it enabling firms to achieve a level of growth otherwise not possible and allowing them to more fully utilise their existing capacity.

As well as encountering more barriers to their overseas development, it is clear that UKTI clients also experience consistently greater benefits from overseas trade, with 75% reporting at least one significant benefit compared to only 58% of non-users. This difference between users and non-users is evident for all of the individual benefits tested.

As might be expected, given that they have had more exposure to overseas business, long-term exporters and those in more markets are considerably more likely to have experienced each of the benefits. Internationalisation also seems to have more positive outcomes for innovative and IP active firms.

Firms with more ambitious growth objectives also report greater benefits, suggesting that the rewards generated from overseas business might be acting as a catalyst for their growth plans. Firms were also asked more specifically about the extent to which internationalisation impacts on product and service development activity.

Table 1.2.5.2 Impacts On Investment In Product/Service Development

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 903 | 248 | 655 | | Invest more time and money in NPD | 42% | 52% | 38% | | Increase money available for NPD | 41% | 52% | 37% | | Increase ROI in NPD | 48% | 61% | 43% |

There is clear evidence that internationalisation can increase the financial rewards of innovation activity, with approaching half of all firms reporting that doing business overseas has increased the return they receive from their investment in product or service development. Around two-fifths feel that doing business overseas has encouraged them to invest more resources in these activities, and a similar proportion believe that it has increased the money they have available to invest in innovation activities.

Those firms that operated their own overseas sites were asked whether this had had any impact on the number of people employed by their company in the UK.

Table 1.2.5.2 Impact Of Overseas Sites On UK Employment

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 903 | 248 | 655 | | Have less UK employees as result | 16% | 11% | 20% | | No change in UK employees | 61% | 60% | 63% | | Have more UK employees as result | 21% | 26% | 16% | | Don’t know | 2% | 3% | 1% | | Mean additional UK employees | +3.5 | +5.3 | +2.2 |

Overall, overseas sites appear to have a slight ‘net positive’ impact on UK employment levels, with 21% of firms indicating that they employ more people in the UK as a result and only 16% stating that they employ fewer. The mean impact is an additional 3.5 employees per firm.

This suggests that in many cases having an overseas site can improve the overall performance of the company and hence enable them to grow and employ more staff in the UK.

Interestingly, UKTI users are significantly more likely to highlight a positive effect on UK employment, with 26% employing more people as a result and only 11% employing fewer. In contrast, non-users are more likely to indicate that the overseas site has resulted in a reduction in UK staffing levels (although the mean impact for this group is still an additional 2 employees). 1.2.6 Opportunities in Emerging & Fast Growing Markets

Firms were read out a list of various emerging or fast growing markets and asked whether they were already doing business there, were very likely to do so in the next 2 years, quite likely to do so or unlikely to do so. They were also asked whether the economic downturn had prompted them to focus more attention on emerging or fast growing markets.

Table 1.2.6 Opportunities In Emerging & Fast Growing Markets

| | Total | UKTI Usage | Non-User | |--------------------------|-------|------------|----------| | | Base | 903 | 248 | 655 | | Likelihood of entering any emerging / fast growing markets in next 2 years | | | | | Already in | 46% | 59% | 40% | | Very likely | 15% | 16% | 14% | | Quite likely | 19% | 14% | 21% | | Unlikely | 20% | 10% | 24% | | Whether devoted more attention to emerging / fast growing markets as result of downturn | | | | | Yes | 28% | 39% | 24% | | No | 71% | 60% | 75% |

As seen above, a little under half (46%) of internationalising firms are already doing business in at least one of the emerging/fast growing markets, and most of the remainder feel that they are very or quite likely to do so in the next 2 years. UKTI users are more likely to be active in these markets (59%), and only 10% of this group feel that they are unlikely to be doing business in any fast growing markets in 2 years time (compared to 24% of non-users).

In terms of specific markets, Saudi Arabia and the UAE are felt to represent the best opportunities, closely followed by South Africa, China and India. Of the markets tested, firms were least enthusiastic about doing business in Mexico.

The likelihood of a firm trading in these fast growing markets increases with age, size and export experience. However, it is certainly not the case that these markets are only targeted by more established firms, as 36% of firms established up to 5 years, 40% of those with 0-9 employees, and 26% of those exporting for less than 2 years are already doing business in at least one of these areas.

Innovative firms, born global firms and those who plan to grow are also all significantly more likely to be doing business in fast growing or emerging markets.

The recent economic conditions have had some impact on the extent to which firms are targeting emerging and fast growing economies, with over a quarter of internationalising firms (28%) indicating that they have devoted more attention to these markets as a direct result of the downturn. This is more likely to be the case amongst UKTI users, innovative firms and those with growth aspirations. 1.2.7 Marketing Channels

All respondents were asked whether they used social networking sites and other website to obtain news or information that was relevant to their business, and were also asked whether they had attended any seminars, tradeshows or conferences in the past year. They were then asked to rate the usefulness of each of these channels (if they used them).

Table 12.7.1 Marketing Channels

| Channel | % using | % rating as useful (4-5 out of 5) | |-----------------------|---------|----------------------------------| | Base: All respondents / All using | 903 | 643, 308, 594 | | Websites | 71% | 62% | | Social networking | 32% | 38% | | Seminars, etc | 65% | 60% |

Approaching three-quarters of firms use websites to obtain news or information relevant to their business, and a third use social networking sites for business purposes. Around two-thirds have attended seminars, tradeshows or conferences in the past year.

In addition to the 32% of firms that used social networking sites, a further 17% were planning to start doing so in the next year. Younger firms, less experienced exporters, innovative firms and those planning for substantial growth were all more likely to either already use social networking sites or intend to do so in the next year. 2. Introduction

UK Trade & Investment (UKTI) commissioned this research in order to gather evidence about trends in UK businesses’ international business strategies, barriers hindering such business, awareness and usage of UKTI, and related issues.

The study was designed with a view to the results being used to help inform UKTI policy development and other aspects of UK Government policy relating to international trade and investment and the ability of British business to optimise opportunities in global markets.

The survey was intended to complement evidence already available from other surveys of UK business, in particular:

- The Community Innovation Survey, which is nationally representative of firms with at least 10 employees, and captures some evidence about international aspects of innovation activity, including international partnerships and other linkages, as well as export activity;

- UKTI’s Performance and Impact Monitoring Survey (PIMS) of businesses who have used UKTI trade services, which also captures some contextual evidence about overseas business experience and aspects of strategy;

- UKTI’s annual survey of exporters who have not used UKTI trade services, which gathers evidence about some aspects of overseas business strategy as well as evidence about barriers to overseas business and associated needs for external help.

The ‘International Business Strategies, Barriers & Awareness Monitoring Survey’ replaced the former annual UKTI awareness survey. It is undertaken on an annual basis, and this is the fourth wave conducted to date. Whilst the core content of the survey is kept consistent each year, there is variation in some of the topics covered. This ensures that annual monitoring with consistent data can be achieved where needed, as well as capturing data on a wider range of issues at less frequent intervals. 3. Research Objectives

In terms of the specific research aims, the study was required to provide robust evidence to:

- Understand the role of international market diversification in business development strategies, including its effects on revenue growth and resilience, profitability and return on investment in new product development;

- Identify drivers of geographical focus, including the role of business customers, and to track activity and interest in emerging and high growth markets;

- Understand links between innovation, R&D and overseas business development, including links between innovation and mode of market entry (e.g. exploring whether innovative firms are more likely to need help with issues related to outward investment or other less common internationalisation modes);

- Understand the barriers encountered by UK businesses in seeking to develop overseas business, both for new exporters and for firms seeking to enter new markets, and investigate how these differ across markets and the role played by market entry mode in helping overcome these barriers;

- Identify awareness and use of UKTI support;

- Identify and assess the extent to which credit conditions and related issues may be impacting on firms’ international business development, including their investment in R&D and innovation activities;

- Capture evidence about the characteristics of users and non-users of UKTI services, including innovation activity, scope of international business and modes of internationalisation employed.

This study built on the three previous survey waves, replicating the previous methodology so as to provide consistent year-on-year data, whilst developing the previous questionnaire to ensure that the 2011 objectives were fully addressed. 4. Methodology

The research was conducted via quantitative, CATI(^2) interviews, administered by a specialist team of business-to-business researchers with extensive experience of conducting similar studies with this type of audience.

4.1 Coverage

A total of 903 interviews were conducted with a random sample of firms involved in overseas business activities, covering the full range of internationalisation modes such as selling to overseas customers both directly and via agents or distributors, doing business overseas via licensing, franchising and other contractual agreements, and operating overseas sites. Whilst data was collected on import activity, only those firms also involved in other overseas business activities were selected for interview.

Whilst the majority of the sample (842 of the 903 interviews) were involved in at least one of these forms of internationalisation at the time of the interview, a small number (61) were not yet doing business overseas (although to be eligible for the study they had to indicate that they were planning to start in the next year). This latter group have been labelled ‘considerers’ in the analysis.

In addition to the random sample of 903 internationalising firms, an additional ‘boost’ of 100 interviews with firms that operated their own overseas sites was also conducted. The purpose of this was to enable more detailed and robust analysis to be conducted amongst this key sub-group. Only a relatively small minority of internationalising firms operate their own sites overseas (11%), with 94 of the firms covered in the main sample falling into this category. The boost interviews therefore increased the analysis base to 194 for this group.

4.2 Sample Design

The sampling approach differed for the ‘core’ sample of 903 internationalising firms and the additional ‘boost’ of 100 firms with overseas sites. Details of each approach are set out below:

4.2.1 Core Sample

Since one of the key objectives of this research was to ensure coverage of firms doing overseas business via the full range of modes, and not just simply exporting in the traditional sense, the sample frame was built from a random sample of UK businesses which was then screened to identify those engaged in overseas business. This approach had the further advantage of allowing the inclusion of ‘considerers’ in the research.

The initial sample frame was sourced from a Companies House-based list provided by Experian, with the sample stratified by age of firm. It was decided that a disproportionate sample design would be used, so that a robust number of interviews were conducted with 3 age groups of firms (those established up to 5 years, 6-10 years and over 10 years).

(^2) Computer Assisted Telephone Interviewing. In order that the incidence within the sample frame of firms eligible for interview (i.e. engaging in international business activity) was kept to within sensible limits, an approach was taken to the construction of the initial sample frame whereby a small number of industry sectors with a very low proportion of firms expected to be involved in overseas business activity were excluded. The exclusions were made on the basis of analysis of data from the Community Innovation Survey (CIS) on the incidence of exporting for individual industry sectors by age group(^3). The available data only enabled exclusions to be made at the level of 2-digit SIC codes, but a number of more detailed sub-sectors were also excluded based on both common sense and the research team’s experiences of the previous surveys and pilot sessions (e.g. sub-post offices, taxi firms, dispensing chemists, etc).

Whilst both users and non-users of UKTI were included in the research, the sample lists were screened against lists of firms participating in the most recent main PIMS and PIMS Follow-Up surveys so as not to over-burden businesses with too frequent research.

4.2.2 Boost Sample

Based on previous survey evidence, only around 2-3% of all UK firms operate overseas sites(^4). Taken in conjunction with an expected response rate of 20-25% for this type of survey, this meant that if the boost sample was to replicate the ‘freefind’ approach used for the core sample, a total of 20,000-25,000 individual firms would have to be contacted to achieve the 100 boost interview with firms that operate overseas sites. As a result, a more pragmatic and cost-efficient approach was employed, whereby a sample of UK firms known to have overseas sites was sourced from a commercial sample provider.

Initial ‘screening’ questions were included to ensure that these UK firms had responsibility for or control over the overseas site, rather than the overseas site just being the head office of their parent company or the premises of other group companies.

It should be noted that the boost sample is unlikely to be truly representative of all firms with overseas sites as certain types of firms (e.g. those with higher turnovers) are more likely to be included in these ‘bought in’ samples. Indeed, there are a number of significant profile differences between the firms with overseas sites that came through the boost sample and those that were picked up in the ‘freefind’ core sample. These differences are detailed later in this report.

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(^3) Based on analysis by Professor Richard Harris, University of Glasgow.

(^4) This estimate is based on c.20% of all UK firms being involved in overseas business, and around 10-12% of these operating their own overseas sites. 4.3 Questionnaire Design

Strong emphasis was placed on questionnaire design in the early stages of this project to ensure that the questionnaire was easily understandable, flowed logically, was of an acceptable length and was capable of delivering high quality data across all the areas necessary to answer the research objectives.

Given that some of the question areas had not been covered in previous studies, an initial qualitative piloting phase was undertaken to help test and inform the main questionnaire. This consisted of a total of 4 in-depth, less-structured interviews to ensure that the new question areas made sense to respondents and covered all of the pertinent issues.

Following this qualitative phase the quantitative questionnaire was revised where necessary, and then a full ‘live’ quantitative pilot was conducted on CATI. This took place over the course of 2 days and involved OMB executives and UKTI representatives listening to ‘live’ interviews conducted by the telephone research team. Based on this session, further changes were then made to the questionnaire script prior to the start of main fieldwork. A copy of the final questionnaire is appended to this report.

4.4 Fieldwork

Main fieldwork was conducted in January and February 2011, and interviews lasted an average of c.20 minutes.

The following table summarises the number of sample records selected for CATI, the number of records lost due to screening-out or incorrect contact details, and the number of interviews completed along with the associated response rate.

| Table 4.4 Sample Analysis | |---------------------------| | **Core sample** | **Boost sample** | | Selection for CATI | 20,979 | 900 | | - Unusable (no overseas business activity) | 13,951 | 475 | | - Unusable (contact details incorrect) | 2,896 | 85 | | Total useable sample | 4,132 | 340 | | Interviews achieved | 903 | 100 | | Response rate (%) | 22% | 29% | | Refusal rate (%) | 54% | 30% | 4.5 Analysis & Weighting

4.5.1 Analysis Approach

For the majority of the analysis in this report (e.g. ‘total’ figures, analysis by age, analysis by years exporting, etc) only the core sample has been included. The reason for this is that the core sample was based on a random sample of UK firms and hence provides a ‘true’ and representative picture of internationalising firms (and if the boost sample was included it would skew the data by over-representing firms with overseas sites).

4.5.2 Weighting

All of the core sample data has been weighted to account for the disproportionate nature of the sample design (i.e. the disproportionate sampling by age of firm). The weighting regime uses data from the 2007/8 Annual Small Business Survey on the age profile of UK exporters (displayed below), with the data weighted to the profile shown.

| Age profile of UK exporters (2007/8 ASBS) | Age profile of interviewed firms | Weighting | |------------------------------------------|---------------------------------|-----------| | Up to 5 years | 16.8% | 26.1% | 0.64 | | 5-10 years | 23.4% | 28.3% | 0.83 | | More than 10 years | 59.8% | 45.5% | 1.31 |

However, for all analysis of firms with overseas sites, the boost sample has been combined with those firms in the core sample that have an overseas site, as this enables more robust analysis of this group. This overseas sites data has not been weighted as there is no available information on the true profile of firms with overseas sites.

4.5.3 Base Size Descriptions

Under each chart in this report is a base description, which provides details of which firms the analysis is based on (e.g. All respondents, All exporters, etc), the number of firms included in the analysis, and the percentage falling into any categories that are not shown in the chart itself (e.g. ‘Don’t know/refused’ responses).

For example, the base description below indicates that analysis shows results for all firms that are exporting, the ‘total’ results in the chart are based on 842 firms, and 3% of these answered ‘don’t know’ to this particular question. It also shows that the ‘UKTI users’ results are based on 242 firms (1% of whom answered ‘don’t know’) and the ‘Non Users’ results are based on 600 firms (4% of whom answered ‘don’t know’)

Example Base: All exporters (Base, Don’t know) Total (842, 3%), UKTI Users (242, 1%), Non-Users (600, 4%) 4.5.4 Analysis Definitions

Throughout this report, sub-analysis has been provided by a number of variables relating to key business characteristics. The following provides details of how these variables have been defined.

| Innovative Firms | |------------------| | Firms have been defined as ‘innovative’ if they… | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product/service development | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years except firms established in the last 2 years |

| Innovative Firms (Alternative, Tighter Definition) | |--------------------------------------------------| | Firms have been defined as ‘innovative’ under the alternative, tighter definition if they … | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product or service development and at least some employees are involved in the development of scientific or technical knowledge not commonly available | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years and these are ‘new to the world’ or ‘new to the sector’ |

| IP Active Firms | |-----------------| | Firms have been defined as ‘IP Active’ if they… | | • Have applied for or obtained any patents, trademarks or other legal protection for their products or services, either in the UK or overseas |

| Young, Technology Intensive Firms | |----------------------------------| | Firms have been defined as being ‘young, technology intensive’ if they… | | • Have been established for 5 years or less | | • And are classified as being innovative using the alternative (tighter) definition or are classified as IP active | Born Global Firms

Firms have been defined as being ‘born global’ if they...

- Have been established for 5 years or less
- And have been doing business overseas for as long as they have been established

Born Global Firms (Alternative, Tighter Definition)

Firms have been defined as being ‘born global’ under the alternative (tighter) definition if they...

- Have been established for 5 years or less
- And have been doing business overseas for as long as they have been established
- And the proportion of turnover accounted for by overseas sales is over 25%

Growth – ASBS Definition

Firms have been classified as displaying ‘sustained growth’ if...

- Their employee numbers have grown over the last 3 years
- And, they are anticipating substantial growth over the next 5 year

Firms have been classified as displaying ‘contained growth’ if...

- Their employee numbers have grown over the last 3 years
- But, they are not anticipating substantial growth over the next 5 years

Firms have been classified as displaying ‘new growth’ if...

- Their employee numbers have not grown over the last 3 years including firms established in the last 3 years
- But, they are anticipating substantial growth over the next 5 years

Firms have been classified as displaying ‘no growth’ if...

- Their employee numbers have not grown over the last 3 years including firms established in the last 3 years
- And, they are not anticipating substantial growth over the next 5 years Growth – OECD Definition

Firms have been defined as ‘high-growth’ if…

- Their employee numbers have grown by more than 75% over the last 3 years except firms established in the last 3 years
- And, they are less than 5 years old

Firms have been defined as ‘gazelles’ if…

- Their employee numbers have grown by more than 75% over the last 3 years except firms established in the last 3 years
- And, they are less than 5 years old

4.5.5 Statistical Significance

Throughout this report, any differences between types of firm that are referred to as being ‘significant’ are statistically significant at the 95% level of confidence. In some cases apparent differences that are not statistically significant at this level have been highlighted, but made clear that they are not significant. 4.6 Core vs. Boost Sample – Profile Differences

As mentioned previously, there are a number of differences in the profile of firms with overseas sites between those that were part of the core sample and those that were part of the boost sample. These are detailed below:

Table 4.6.1 Profile Comparison

| Profile | Firms with overseas sites | Core sample (free-find) | Boost sample (bought-in) | |--------------------------|---------------------------|-------------------------|--------------------------| | Base | | 94 | 100 | | Age | | | | | \<2 years | 5% | 1% | | 2-5 years | 9% | 1% | | 5-10 years | 35% | 20% | | 10-20 years | 19% | 25% | | >20 years | 32% | 53% | | No. of employees | | | | | \<10 | 30% | 12% | | 10-49 | 43% | 35% | | 50-99 | 12% | 14% | | 100-249 | 7% | 16% | | 250+ | 9% | 22% | | Turnover | | | | | \<£500k | 19% | 3% | | £500k-£2m | 30% | 8% | | £2m-£10m | 19% | 19% | | £10m-£50m | 13% | 32% | | >£50m | 7% | 18% | | Sector | | | | | Production | 34% | 40% | | Services | 65% | 57% | | Ownership | | | | | UK | 71% | 76% | | Foreign/joint UK & foreign | 28% | 24% | | No. of overseas sites | | | | | None (considerer) | 11% | 0% | | 1 | 38% | 20% | | 2-5 | 32% | 40% | | 6-10 | 5% | 14% | | >10 | 13% | 26% | | Type of overseas sites | | | | | Manufacturing/assembly | 22% | 27% | | Call centre | 9% | 3% | | Sales/service delivery | 85% | 95% | | R&D | 19% | 7% | | No. of markets active in | | | | | None (considerer) | 11% | 0% | | 1 | 5% | 4% | | 2-5 | 20% | 7% | | 6-10 | 16% | 20% | | >10 | 47% | 69% |

As detailed above, firms from the boost sample tend to be older, larger, have more overseas sites and be active in a greater number of overseas markets. 5. Modes of Internationalisation

5.1 Modes Used

Firms were asked which of a list of overseas business activities they had been involved in over the last five years. Those not involved in any of these overseas activities were asked whether they were seriously considering starting to conduct overseas business via any of these routes in the next year, and only those responding positively to this question were invited to take part in the research. This group (the ‘considerers’) were asked to indicate which types of activities they were planning to become involved in.

The chart below shows usage (and consideration for ‘considerers’) of these overseas business activities.

Chart 5.1.1 Modes Of Internationalisation Used In Last 5 Years (Or Seriously Considering In Next Year For ‘Considerers’)

- Selling direct: 87%
- Selling through agents or distributors: 41%
- Licensing, franchising or contractual arrangements: 11%
- Operating overseas site: 11%

Base: All respondents (Base) – (903)

The vast majority of internationalising firms sell direct to businesses or individuals overseas, and two-fifths use agents or distributors. However, only around 1 in 10 are involved in other ‘contractual arrangements’ (such as licensing or franchising) or operate their own overseas sites.

This is consistent with the picture seen in previous waves of this survey of internationalising firms.

______________________________________________________________________

5 Please note that 61 of the 903 firms interviewed (7%) were not yet doing business overseas but were planning to do so in the next year. The table below shows separate analysis of internationalisation modes for firms that are already engaged in overseas business and those that are just planning to start in the next year (i.e. ‘considerers’).

Table 5.1.1 Modes Of Internationalisation – By Active Exporters & Considerers

| | Total | Status | |----------------------|-------|--------| | | | Active | Considerer | | Base | 903 | 842 | 61 | | Selling direct | 87% | 87% | 78% | | Agents/distributors | 41% | 42% | 31% | | Contractual arrangements | 11% | 11% | 20% | | Overseas site | 11% | 10% | 19% |

As seen above, firms that are just planning to start doing business overseas are comparatively less likely to be looking at selling direct or using agents, but are more inclined to be considering contractual arrangements or setting up their own overseas site. However, the low base of ‘considerers’ should be taken into account when interpreting these results. 5.2 Number & Type of Overseas Sites

As seen previously, 11% of firms operated their own overseas sites (or were planning to do so in the next year). These firms were asked to provide details of the main purpose of the site(s).

Most overseas sites are either distribution/sales offices or service delivery sites. However, a quarter of firms have production sites.

Firms with overseas sites were also asked to indicate how many sites it was that they had, with the following results. Please note that ‘considerers’ were not asked this question and have been excluded from the analysis below.

Over two-thirds of those firms with overseas sites have 2 or more of them, and a small minority (9%) operate in excess of 20 sites, suggesting that they are large multi-nationals. As mentioned previously, there were a number of differences between firms interviewed in the core sample (a representative sample of internationalising firms) and those interviewed in the boost sample (a ‘bought in’ sample of firms with overseas sites). This is particularly evident when it comes to the number and type of overseas sites that they operate, as set out below.

Table 5.2.2 Type of Overseas Sites – By Sample Type

| | 2011 Survey | | | 2010 Survey | | |----------------------|-------------|----------|----------|-------------|----------| | | Total | Core sample | Boost sample | Total | | | Base: All with/considering overseas sites | 194 | 94 | 100 | 121 | | | Manufacturing/assembly | 25% | 22% | 27% | 21% | | | Call centre | 6% | 9% | 3% | 7% | | | Distribution/sales | 76% | 66% | 86% | 64% | | | Service delivery | 46% | 50% | 42% | 57% | | | R&D | 13% | 19% | 7% | 27% | | | Don't know | 4% | 5% | 2% | 2% | |

Table 5.2.3 Number of Overseas Sites – By Sample Type

| | 2011 Survey | | | 2010 Survey | | |----------------------|-------------|----------|----------|-------------|----------| | | Total | Core sample | Boost sample | Total | | | Base: All with overseas sites | 184 | 84 | 100 | 115 | | | One | 30% | 43% | 20% | 41% | | | 2-5 | 38% | 36% | 40% | 37% | | | 6-10 | 10% | 6% | 14% | 11% | | | 11-20 | 11% | 10% | 13% | 3% | | | 21-50 | 7% | 4% | 9% | 3% | | | More than 50 | 3% | 1% | 4% | 4% | | | Don't know | 1% | 1% | 0% | 2% | |

As detailed above, firms in the boost sample tended to have a significantly greater number of overseas sites, with 80% having more than one such site compared to just 56% of firms in the core sample. When comparing on a ‘like-for-like’ basis between the 2011 core sample and the 2010 total sample (which did not include a boost), the profile in terms of number of overseas sites is very similar.

It also appears that firms in the boost sample are more likely to be operating distribution/sales sites, whereas those in the core sample are comparatively more likely to have R&D facilities overseas. Again, the profile of the core sample closely matches that of the 2010 sample in this respect. 5.3 ‘Web Only’ Exporters

Almost half of all internationalising firms (48%) only sell direct to customers when doing business overseas (i.e. they do not use agents, contractual arrangements or operate overseas sites). This group were asked whether they ever made overseas sales directly through their website and, if so, whether they only sold overseas through their website. The chart below summarises these results.

Chart 5.3.1 Web Sales (Firms That Only Sell Direct)

Approaching a third (31%) of those firms that only sell direct indicate that at least some of these sales are made through their website, and 8% rely solely on web sales.

As seen below, when applied to the total sample, this equates to 4% of all internationalising firms being ‘web only’ exporters. Non-users of UKTI are significantly more likely to only sell overseas through their website (5% compared to just 1% of users).

Table 5.3.1 Web Only Exporters – By UKTI Usage

| | Firms that only sell direct | All internationalising firms | |----------------------|----------------------------|-----------------------------| | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | **Base** | 432 | 90 | 342 | 903 | 248 | 655 | | ‘Web only’ exporters | 8% | 3% | 9% | 4% | 1% | 5% | The table below provides details of the sector profile of ‘web only’ exporters, in comparison to internationalising firms as a whole. Please be aware of the low base size for ‘web only’ exporters when interpreting these results.

Table 5.3.2 Web Only Exporters – Sector Profile

| Sector | All internationalising firms | ‘Web only’ exporters | |---------------------------------------------|------------------------------|----------------------| | Base | 903 | 36 | | A – Agriculture, hunting & forestry | 0% | 0% | | D – Manufacturing | 34% | 23% | | E – Electricity, gas & water supply | 0% | 0% | | F – Construction | 1% | 0% | | G – Wholesale & retail trade | 21% | 44% | | H – Hotels & catering | 0% | 0% | | I – Transport, storage & communication | 5% | 4% | | J – Financial intermediation | 5% | 2% | | K – Real estate, renting & business activities | 27% | 19% | | M – Education | 1% | 4% | | N – Health & social work | 0% | 0% | | O – Other community, social & personal service activities | 4% | 5% |

As might be expected, firms that do business overseas solely through their website are significantly more likely to be operating in the wholesale and retail sector. 5.4 Importing

Firms were also asked whether they imported any goods or services from overseas, and the chart below summarises these results.

Chart 5.4.1 Proportion That Have Imported Goods or Services in Last 5 Years

Over half of firms have imported in the last 5 years, and this is more likely to be the case amongst users of UKTI. However, please note that firms were not eligible to participate in the research purely on the basis of import activity, and they had to also be involved in one of the outward internationalisation modes to qualify for interview. 5.5 Internationalisation Modes by Firm Profile

This section provides more detailed analysis of the internationalisation modes used by firm characteristic (such as UKTI usage, size, innovation, etc).

As seen below, whilst users and non-users are equally likely to sell direct to customers overseas and use contractual arrangements, the former are more inclined to also use agents or distributors and operate their own overseas sites.

Table 5.5.1 Modes Of Internationalisation – By UKTI Usage

| | Total | UKTI Usage | |----------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Selling direct | 87% | 88% | 86% | | - 'Web only' exporters | 4% | 1% | 5% | | Agents/distributors | 41% | 54% | 36% | | Contractual arrangements | 11% | 12% | 11% | | Overseas site | 11% | 17% | 8% | | - Manufacturing/assembly | 3% | 5% | 2% | | - Call centre | 1% | 0% | 1% | | - Sales/service delivery | 9% | 14% | 7% | | - R&D | 2% | 4% | 2% | | Importing | 56% | 64% | 52% |

Small firms with less than 10 employees are generally less likely to use agents/distributors, do business overseas through contractual and operate their own overseas sites. As might be expected, younger firms that have been established for no more than 5 years are also less likely to have overseas sites. Smaller and younger firms are also most likely to be ‘web only’ exporters.

Table 5.5.2 Modes Of Internationalisation – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Selling direct | 88% | 88% | 86% | 87% | 87% | 80% | 82% | 89% | | - 'Web only' exporters | 7% | 3% | 3% | 5% | 2% | 1% | 0% | 0% | | Agents/distributors | 37% | 38% | 43% | 37% | 45% | 58% | 43% | 49% | | Contractual arrangements | 12% | 15% | 9% | 9% | 13% | 18% | 11% | 9% | | Overseas site | 6% | 13% | 12% | 5% | 16% | 25% | 19% | 33% | | - Manufacturing/assembly | 0% | 2% | 3% | 1% | 4% | 7% | 0% | 22% | | - Call centre | 0% | 2% | 0% | 0% | 1% | 4% | 2% | 0% | | - Sales/service delivery | 5% | 12% | 9% | 4% | 13% | 23% | 19% | 24% | | - R&D | 0% | 2% | 3% | 1% | 3% | 9% | 6% | 9% | | Importing | 52% | 48% | 60% | 51% | 59% | 71% | 64% | 71% | As might be expected, the longer firms have been doing business overseas and the more markets they are in, the more likely they generally are to use each mode (although the exception to this is contractual arrangements which are slightly more widely used by firms that have only started doing business overseas in the last 2 years). In particular, experienced firms are notably more inclined to use agents and distributors, and they are also more likely to import. However, it is interesting to note that export experience appears to have little bearing on the likelihood of being a ‘web only’ exporter, suggesting that firms that fall into this category do not tend to develop alternative sales channels over time.

Table 5.5.3 Modes Of Internationalisation – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 198 | 415 | 287 | 441 | 174 | 279 | | Selling direct | 80% | 88% | 87% | 84% | 89% | 89% | | - ‘Web only’ exporters | 5% | 4% | 3% | 3% | 5% | 3% | | Agents/distributors | 36% | 37% | 47% | 30% | 42% | 57% | | Contractual arrangements | 14% | 11% | 10% | 9% | 10% | 14% | | Overseas site | 11% | 10% | 12% | 8% | 9% | 16% | | - Manufacturing/assembly | 3% | 2% | 3% | 2% | 2% | 5% | | - Call centre | 1% | 1% | 1% | 1% | 1% | 1% | | - Sales/service delivery | 10% | 8% | 10% | 6% | 7% | 14% | | - R&D | 1% | 2% | 3% | 1% | 1% | 5% | | Importing | 42% | 52% | 65% | 44% | 63% | 69% |

The following table provides analysis by whether or not firms are innovative or IP active (for the definitions of ‘innovative’ firms and ‘IP active’ firms used in this analysis, see Chapter 6.7). It is clear from the analysis below that innovative and IP active firms are more likely to be engaged in the less common internationalisation modes (i.e. agents, contractual arrangements and overseas sites). These types of firms are also more likely to import.

Table 5.5.4 Modes Of Internationalisation – By Innovation

| | Innovative | IP Active | |------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Selling direct | 88% | 86% | 87% | 92% | 85% | | - ‘Web only’ exporters | 3% | 4% | 4% | 2% | 4% | | Agents/distributors | 50% | 46% | 29% | 54% | 37% | | Contractual arrangements | 14% | 13% | 6% | 18% | 9% | | Overseas site | 15% | 13% | 5% | 19% | 8% | | - Manufacturing/assembly | 4% | 4% | 0% | 5% | 2% | | - Call centre | 1% | 1% | 0% | 1% | 1% | | - Sales/service delivery | 14% | 11% | 4% | 18% | 6% | | - R&D | 4% | 3% | 1% | 6% | 1% | | Importing | 62% | 62% | 41% | 67% | 52% | The table below provides analysis by firms’ growth objectives over the next 5 years, and also shows results separately for innovative, high growth firms (a key group for UKTI). This analysis suggests that those firms that are planning to grow are more likely to be involved in all of the internationalisation modes, with those expecting ‘substantial’ growth particularly likely to have overseas sites and be doing business overseas through contractual arrangements.

Table 5.5.5 Modes Of Internationalisation – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non innovative | |-------------------|---------------------|---------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Selling direct | 80% | 88% | 89% | 89% | 85% | 87% | | - 'Web only' exporters | 3% | 4% | 3% | 4% | 3% | 4% | | Agents/distributors | 37% | 40% | 46% | 50% | 44% | 29% | | Contractual arrangements | 5% | 11% | 15% | 15% | 12% | 6% | | Overseas site | 7% | 9% | 19% | 21% | 10% | 5% | | - Manufacturing/assembly | 0% | 2% | 6% | 7% | 2% | 0% | | - Call centre | 1% | 1% | 1% | 1% | 1% | 0% | | - Sales/service delivery | 5% | 7% | 16% | 18% | 8% | 4% | | - R&D | 2% | 1% | 5% | 6% | 2% | 1% | | Importing | 48% | 59% | 57% | 61% | 62% | 41% |

The table below shows usage of the various different modes of internationalisation by firms’ growth, using the ASBS and OECD definitions (for full details of these definitions please refer to Chapter 6.9). There is some evidence that firms that are defined as growing under the ASBS definition (i.e. sustained, contained or new growth) are more likely to use agents and operate overseas sites.

Table 5.5.6 Modes Of Internationalisation – By Growth

| | ASBS Definition | OECD Definition | |-------------------|-----------------|-----------------| | | Sustained | Contained | New | No growth | High growth | Gazelles | | Base | 120 | 128 | 160 | 495 | 112 | 38 | | Selling direct | 93% | 86% | 85% | 86% | 94% | 95% | | - 'Web only' exporters | 3% | 1% | 4% | 4% | 4% | 3% | | Agents/distributors | 49% | 45% | 45% | 37% | 45% | 39% | | Contractual arrangements | 16% | 7% | 13% | 10% | 16% | 5% | | Overseas site | 20% | 12% | 18% | 7% | 18% | 5% | | - Manufacturing/assembly | 5% | 4% | 7% | 1% | 4% | 0% | | - Call centre | 2% | 1% | 1% | 1% | 2% | 0% | | - Sales/service delivery | 19% | 9% | 15% | 6% | 17% | 5% | | - R&D | 6% | 1% | 3% | 1% | 6% | 0% | | Importing | 59% | 63% | 56% | 53% | 51% | 61% | Analysis has also been provided by whether or not younger firms are ‘born global’ (i.e. have been conducting business overseas since they were established) or are defined as being ‘young, technology intensive’. For the definitions of these groups, please refer to Chapters 6.6.2 and 6.7.3 respectively.

As seen below, firms that are classified as ‘born global’ under the alternative, tighter definition are significantly more likely to use more advanced internationalisation modes (i.e. agents, contractual arrangements, overseas sites). They also appear less likely to be ‘web only exporters’ but are more likely to be importing goods and services from overseas.

Table 5.5.7 Modes Of Internationalisation – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 234 | 128 | 52 | 124 | 667 | | Selling direct | 88% | 91% | 87% | 92% | 86% | | - ‘Web only’ exporters | 7% | 6% | 2% | 6% | 3% | | Agents/distributors | 37% | 40% | 50% | 44% | 42% | | Contractual arrangements | 12% | 11% | 17% | 12% | 11% | | Overseas site | 6% | 6% | 6% | 4% | 12% | | - Manufacturing/assembly | 0% | 0% | 0% | 1% | 3% | | - Call centre | 0% | 0% | 0% | 0% | 1% | | - Sales/service delivery | 5% | 5% | 6% | 2% | 10% | | - R&D | 0% | 0% | 0% | 0% | 3% | | Importing | 52% | 61% | 73% | 59% | 57% | 5.6 Number of Modes Used

The chart below provides an analysis of the number of modes firms have been involved in the last five years (or are planning to do in the next year in the case of ‘considerers’). Please note that this analysis is based just on the ‘outward’ internationalisation modes and does not include importing.

Chart 5.6.1 Number Of Modes Of Internationalisation Used In Last 5 Years (Or Considering In Next Year For ‘Considerers’)

Approaching two-thirds of all internationalising firms (63%) are only using a single mode when doing business overseas, with only 1 in 10 involved in 3 or 4 different modes.

UKTI users are more likely to employ multiple approaches when doing business overseas, with 52% using more than one mode compared to only 32% of non-users. As seen below, this picture varies considerably across modes. In particular, those involved in some form of contractual arrangement or operating their own overseas site are much more likely to be involved in 3 or 4 different modes, suggesting that firms tend to adopt these approaches later in their international development.

Table 5.6.1 Number of Modes – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 784 | 363 | 105 | 194 | | One | 59% | 23% | 9% | 10% | | Two | 29% | 54% | 25% | 40% | | Three | 10% | 19% | 50% | 36% | | Four | 2% | 5% | 17% | 14% | 5.7 Order of Setting Up Overseas Sites

Those firms that operated their own overseas site(s) were asked when they set this up in relation to the various other modes of internationalisation. The chart below summarises these results, both at the total level and by the total number of modes firms are involved in.

Chart 5.7.1 When First Set Up Overseas Site (In Relation To Other Modes)

Half of all firms with overseas sites (51%) set up this site after selling overseas through one other mode. However, it is interesting to note that for a fifth of these firms, the first way in which they did business overseas was through establishing an overseas site. The table below presents this data in a different way, showing the various combinations of modes that firms used before setting up their first overseas site.

Table 5.7.1 Internationalisation Modes Used Before Setting Up Overseas Site

| Individual combinations | Firms with overseas sites | |--------------------------------------------------------------|---------------------------| | Base: All with overseas site | 184 | | Selling direct | 40% | | Selling direct & agents/distributors | 10% | | Agents/distributors | 8% | | Contractual arrangements | 3% | | Selling direct & agents/distributors & contractual arrangements| 3% | | Selling direct & contractual arrangements | 2% | | Agents/distributors & contractual arrangements | 1% | | Nothing (i.e. overseas site was first mode) | 20% | | Don’t know | 14% |

Summary

| Net: Sold direct before overseas site | 55% | | Net: Used agents/distributors before overseas site | 21% | | Net: Used contractual arrangements before overseas site | 9% | | Net: Overseas site was first mode used | 20% |

Over half of these firms (55%) sold direct before setting up their overseas site, a fifth used agents or distributors and around 1 in 10 used contractual arrangements.

The most common combination of mode(s) before setting up an overseas site was to just sell direct (40%), followed by selling direct and using agents (10%) and just using agents (8%). 5.8 Reasons for Operating Overseas Sites

5.8.1 Summary

Those firms that operated an overseas site, or planned to do so in the next year, were read out a number of possible reasons for doing so and asked how important each of these were to them on a 5 point scale (where 1 meant it was a ‘not at all important reason’ and 5 meant it was a ‘very important reason’).

Due to a combination of interview length constraints and relevance, the specific reasons tested differed depending on the type(s) of overseas site each firm operated. The table below sets out the various reasons for operating overseas sites that were tested, and which types of sites they were asked about.

Table 5.8.1.1 Reasons For Operating Overseas Site - Approach

| Reason | Manufacturing / Assembly | Call Centre | Distribution / Sales Office | Service Delivery | R&D | Base | |------------------------------------------------------------------------|--------------------------|-------------|------------------------------|------------------|-----|------| | Your overseas customers prefer you to have a local presence | ✓ | ✓ | ✓ | ✓ | ✓ | (194) | | It is the best way to access people with the specialist knowledge and skills you require | ✓ | ✓ | ✓ | ✓ | ✓ | (194) | | It enables you to overcome import restrictions, avoid import duties or gain other tax advantages | ✓ | ✓ | ✓ | ✓ | ✓ | (194) | | The technical nature of your products or services means that you need an ‘on the ground’ facility to provide customer support | ✓ | ✓ | ✓ | ✓ | ✓ | (194) | | Your competitors have sites in that market, so you decided to do the same | ✓ | ✓ | | | ✓ | (67) | | It enables you to access cheaper resources, such as cheaper wages or cheaper raw materials | ✓ | ✓ | | | ✓ | (67) | | It is the best way to build up strong working relationships with your customers in that market | ✓ | ✓ | ✓ | | ✓ | (192) | | It enables you to offer quicker response times for your customers | ✓ | ✓ | | | | (55) | | It reduces shipment costs | ✓ | | | | | (48) | | You always approach overseas markets by setting up an overseas site | ✓ | ✓ | | | | (182) | | You don’t want to reduce your profit margins by employing a ‘middle man’ | ✓ | ✓ | | | | (182) | | It is the best way to protect your intellectual property | ✓ | ✓ | ✓ | | ✓ | (193) | | It is the best way to ensure quality or customer service | ✓ | ✓ | | | ✓ | (182) | | It is the best way to get the necessary product development done for customers in that market | ✓ | | | | ✓ | (25) | The following table shows the proportion of firms rating each reason as important (i.e. scoring 4 or 5 on the 5 point scale).

Table 5.8.1.2 Reasons For Operating Overseas Site – By Type Of Site

| % rating as important reason (4-5 out of 5, where 1 is ‘not at all important’ and 5 is ‘very important’) | Type of Site | |-------------------------------------------------|--------------| | | Manufacturing / Assembly | Call Centre | Distribution / Sales Office | Service Delivery | R&D | | Base: All with/considering overseas sites | 48 | 11 | 148 | 89 | 25 | | Your overseas customers prefer you to have a local presence | 71% | 73% | 76% | 81% | 68% | | It is the best way to access people with the specialist knowledge and skills you require | 46% | 27% | 49% | 55% | 44% | | It enables you to overcome import restrictions, avoid import duties or gain other tax advantages | 25% | 36% | 14% | 19% | 24% | | The technical nature of your products or services means that you need an ‘on the ground’ facility to provide customer support | 60% | 64% | 61% | 61% | 52% | | Your competitors have sites in that market, so you decided to do the same | 48% | 45% | - | - | 32% | | It enables you to access cheaper resources, such as cheaper wages or cheaper raw materials | 58% | 55% | - | - | 36% | | It is the best way to build up strong working relationships with your customers in that market | 85% | - | 78% | 83% | - | | It enables you to offer quicker response times for your customers | 81% | 91% | - | - | - | | It reduces shipment costs | 46% | - | - | - | - | | You always approach overseas markets by setting up an overseas site | - | - | 22% | 21% | - | | You don’t want to reduce your profit margins by employing a ‘middle man’ | - | - | 36% | 46% | - | | It is the best way to protect your intellectual property | 35% | - | 36% | 39% | 24% | | It is the best way to ensure quality or customer service | - | - | 68% | 73% | - | | It is the best way to get the necessary product development done for customers in that market | - | - | - | - | 40% |

Overall, the most significant motivations for operating overseas sites relate to developing relationships with customers and better meeting their needs.

For firms with manufacturing or assembly sites, the key reasons are that it represents the best way of building relationships with overseas customers, it enables quicker response times and that customers prefer a local presence. A similar picture is seen for distribution/sales offices and service delivery sites, with ensuring quality or customer service also emerging as a major motivation for these firms. Please note that the low bases sizes for call centres and R&D facilities makes it difficult to draw firm conclusions in this respect, but it does seem that the main reasons for operating these types of sites are also customer-orientated.

It is interesting to note that relatively few firms are driven by a desire to overcome import restrictions, avoid duties or gain other tax advantages, although this is a slightly more significant motivation for production sites, call centres and R&D facilities.

The following tables provide further analysis of the motivations for operating overseas sites by firm profile. Please note that for all this sub-analysis, only reasons that were asked to more than 90% of respondents are included.

Table 5.8.1.3 Reasons For Operating Overseas Site – By UKTI Usage

| % rating as important reason (4-5 out of 5, where 1 is 'not at all important' and 5 is 'very important') | Total | UKTI Usage | |---|---|---| | | | UKTI User | Non-User | | Base: All with/considering overseas sites | 194 | 80 | 114 | | Overseas customers prefer a local presence | 75% | 78% | 74% | | Best way to access specialist knowledge and skills | 52% | 46% | 56% | | Overcome import restrictions, avoid import duties, tax advantages | 15% | 16% | 14% | | Need ‘on the ground’ support facility due to technical nature of products/services | 62% | 58% | 65% | | Best way to build strong working relationships with customers | 78% | 80% | 76% | | Always approach overseas markets by setting up site | 24% | 25% | 23% | | Don’t want to reduce profit margins by employing ‘middle man’ | 37% | 37% | 38% | | Best way to protect intellectual property | 36% | 34% | 37% | | Best way to ensure quality or customer service | 69% | 71% | 67% |

There are no statistically significant differences between users and non-users of UKTI, and for both groups the key motivations are to build stronger relationships with overseas customers, because customers prefer a local presence and because it is the best way to ensure quality or customer service. The table below provides similar analysis by age and size of firm.

Table 5.8.1.4 Reasons For Operating Overseas Site – By Age & Size

| % rating as important reason (4-5 out of 5) | Age (Years Trading) | Size (Number of Employees) | |-------------------------------------------|---------------------|---------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base: All with/considering overseas sites | | | | | | | | | | | 15 | 53 | 126 | 40 | 75 | 25 | 23 | 30 | | Overseas customers prefer a local presence| 73% | 74% | 76% | 65%| 75% | 92% | 70% | 80% | | Best way to access specialist knowledge and skills | 60% | 53% | 51% | 43%| 60% | 40% | 57% | 50% | | Overcome import restrictions, avoid import duties, tax advantages | 7% | 15% | 16% | 18%| 16% | 8% | 4% | 23% | | Need ‘on the ground’ support facility due to technical nature of products/services | 73% | 64% | 60% | 65%| 59% | 64% | 61% | 63% | | Best way to build strong working relationships with customers | 73% | 81% | 77% | 71%| 79% | 84% | 70% | 83% | | Always approach overseas markets by setting up site | 29% | 32% | 19% | 37%| 23% | 8% | 23% | 24% | | Don’t want to reduce profit margins by employing ‘middle man’ | 36% | 36% | 38% | 37%| 40% | 28% | 36% | 41% | | Best way to protect intellectual property | 47% | 29% | 37% | 44%| 36% | 20% | 35% | 40% | | Best way to ensure quality or customer service | 71% | 64% | 70% | 71%| 67% | 72% | 55% | 76% |

Although there appear to be some differences between firms established in the last 5 years and older firms, the low base size for the former group means that these apparent differences are not statistically significant. However, it is the case that firms that have been trading for less than 10 years are more likely to operate overseas sites because they ‘always approach overseas markets by setting up an overseas site’.

There are also no consistent differences by size of firms in terms of the reasons for operating overseas sites. The table below provides further analysis of the motivations for operating overseas sites by export experience (in terms of years exporting and number of markets firms are active in).

Table 5.8.1.5 Reasons For Operating Overseas Site – By Experience

| % rating as important reason (4-5 out of 5) | Years Exporting | Number of Markets | |--------------------------------------------|-----------------|------------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base: All with/considering overseas sites | 23 | 71 | 100 | 45 | 35 | 113 | | Overseas customers prefer a local presence | 78% | 73% | 76% | 76% | 74% | 75% | | Best way to access specialist knowledge and skills | 57% | 56% | 48% | 60% | 60% | 47% | | Overcome import restrictions, avoid import duties, tax advantages | 17% | 14% | 15% | 11% | 11% | 18% | | Need ‘on the ground’ support facility due to technical nature of products/services | 70% | 62% | 60% | 60% | 54% | 65% | | Best way to build strong working relationships with customers | 86% | 74% | 78% | 77% | 69% | 81% | | Always approach overseas markets by setting up site | 43% | 26% | 18% | 38% | 15% | 21% | | Don’t want to reduce profit margins by employing ‘middle man’ | 48% | 33% | 38% | 35% | 38% | 38% | | Best way to protect intellectual property | 61% | 23% | 39% | 39% | 26% | 38% | | Best way to ensure quality or customer service | 71% | 59% | 75% | 63% | 53% | 76% |

Once again, the low base sizes (particularly for recent exporters) should be considered when interpreting the above data. However, even when this is taken into account, less experienced exporters that have been doing business overseas for less than 2 years or are active in no more than 5 markets are significantly more likely to have decided to set up an overseas site because this is how they always approach overseas markets.

Interestingly, firms that have been exporting for less than 2 years are also significantly more likely to have decided to set up an overseas site because it is the best way to protect their intellectual property. However, it should be noted that there is no difference in this respect by the other measure of export experience (number of markets firms are doing business in).

There is also some indication that long-term exporters (doing business overseas for more than 10 years) and those that are active in more than 10 markets are less likely to view overseas sites as being the best way to access the specialist knowledge or skills they require. However, it should be noted that this difference is not statistically significant. The table below provides further analysis of the motivations for operating overseas sites by the various measures of firms’ innovation levels.

Table 5.8.1.6 Reasons For Operating Overseas Site – By Innovation

| % rating as important reason (4-5 out of 5) | Innovative | IP Active | |-------------------------------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | **Base: All with/considering overseas sites** | 118 | 165 | 29 | 87 | 99 | | Overseas customers prefer a local presence | 76% | 78% | 62% | 78% | 73% | | Best way to access specialist knowledge and skills | 51% | 54% | 41% | 46% | 57% | | Overcome import restrictions, avoid import duties, tax advantages | 16% | 17% | 3% | 23% | 9% | | Need ‘on the ground’ support facility due to technical nature of products/services | 63% | 62% | 59% | 62% | 61% | | Best way to build strong working relationships with customers | 81% | 78% | 75% | 80% | 75% | | Always approach overseas markets by setting up site | 23% | 23% | 29% | 19% | 28% | | Don’t want to reduce profit margins by employing ‘middle man’ | 35% | 38% | 36% | 48% | 27% | | Best way to protect intellectual property | 37% | 34% | 48% | 43% | 32% | | Best way to ensure quality or customer service | 71% | 70% | 61% | 69% | 69% |

Although they are not statistically significant, there is some evidence that innovative firms (by either definition) are more likely to operate overseas sites because their customers prefer a local presence, it is the best way to access specialist knowledge and skills, it helps avoid import duties or provides tax advantages, and it is the best way to ensure quality and customer service.

In contrast, non-innovative firms appear more likely to operate overseas sites simply because they always approach overseas markets in this way. Somewhat surprisingly, they are also more likely to feel that having an overseas site is the best way to protect their intellectual property (although as with all of these apparent differences, this is not statistically significant). However, it should be noted that the opposite is true for IP active firms, who are more likely to operate an overseas site to help protect their intellectual property than is the case for non-IP active firms.

There are other several significant differences between IP active and non-IP active firms, with the former more inclined to establish overseas sites to overcome import restrictions and duties and because they do not wish to reduce their profit margins by employing a ‘middle man’. 5.8.2 Overseas Customers Prefer Local Presence

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because their overseas customers prefer a local presence.

Chart 5.8.2.1 Your Overseas Customers Prefer You To Have A Local Presence

Three quarters of firms indicated that being able to have a local presence was an important motivation for operating their overseas site (i.e. scored 4-5 out of 5), with almost half claiming that this was a ‘very important’ reason. 5.8.3 Access Specialist Knowledge & Skills

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it was the best way to access the specialist knowledge and skills they required.

Chart 5.8.3.1 It Is The Best Way To Access People With The Specialist Knowledge & Skills You Require

Just over half of firms felt that one of the key reasons for operating an overseas site was that it enabled them to access specialist knowledge and skills. 5.8.4 Avoid Import Restrictions/Duties or Gain Tax Advantages

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it enabled them to overcome import restrictions, avoid import duties or gain other tax advantages.

Chart 5.8.4.1 It Enables You To Overcome Import Restrictions, Avoid Import Duties Or Gain Other Tax Advantages

Only 15% of firms indicated that this was an important reason for operating an overseas site (i.e. scored 4-5 out of 5), and well over half claimed that this had not motivated them at all. 5.8.5 Need ‘On The Ground’ Customer Support

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because the technical nature of their products or services meant that they needed an ‘on the ground’ facility to provide customer support.

Chart 5.8.5.1 The Technical Nature Of Your Products Or Services Means That You Need An ‘On The Ground’ Facility To Provide Customer Support

Approaching two-thirds of firms indicated that a key motive for establishing their overseas site was because they needed to be able to deliver customer support in the market, due to the technical nature of their products or services. Over a third felt that this was a ‘very important’ factor in their decision. 5.8.6 Competitors Have Sites In Market

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because their competitors also had sites in that market. Please note that this question was only asked to those operating a manufacturing site, call centre or R&D facility.

Chart 5.8.6.1 Your Competitors Have Sites In That Market, So You Decided To Do The Same

Opinion was fairly evenly divided amongst these firms when it came to the extent that they were motivated by competitors also having sites in the market, with 45% indicating this was an important reason (i.e. 4-5 out of 5) but 42% claiming it had very little or no influence on their decision (i.e. 1-2 out of 5). 5.8.7 Access Cheaper Resources

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it enabled them to access cheaper resources. Please note that this question was only asked to those operating a manufacturing site, call centre or R&D facility.

Chart 5.8.7.1 It Enables You To Access Cheaper Resources, Such As Cheaper Wages Or Cheaper Raw Materials

Just over half of firms with manufacturing sites, call centres or R&D facilities indicated that accessing cheaper resources was a key factor in their decision to establish this site. 5.8.8 Build Customer Relationships

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it was the best way to build up strong working relationships with their customers. Please note that this question was only asked to those operating a manufacturing site, sales/distribution site or service delivery site.

Chart 5.8.8.1 It Is The Best Way To Build Up Strong Working Relationships With Your Customers In That Market

Around three-quarter of these firms felt that the opportunity to build stronger relationships with customers has been an important factor in their decision to operate an overseas site, and only 4% believed that this had had no bearing on their decision. 5.8.9 Quicker Response Times

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it enabled them to offer quicker response times for their customers. Please note that this question was only asked to those operating a manufacturing site or call centre.

Chart 5.8.9.1 It Enables You To Offer Quicker Response Times For Your Customers

Amongst firms with overseas manufacturing sites or call centres, the ability to provide quicker response times to customers is clearly an important factor, with 82% describing this as an important reason (i.e. 4-5 out of 5).

Please note the low base sizes when comparing results between users and non-users of UKTI (26 and 29 respondents respectively). 5.8.10 Reduced Shipment Costs

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it reduced their shipment costs. Please note that this question was only asked to those operating a manufacturing site.

Chart 5.8.10.1 It Reduces Shipment Costs

Whilst almost half of firms with overseas manufacturing sites (46%) indicated that reduced shipment costs has been an important driver in the decision to establish this site, a similar proportion (42%) claimed that this had little or no influence on their decision (i.e. scored 1-2 out of 5).

Please note the low base sizes when comparing results between users and non-users of UKTI (26 and 22 respondents respectively). 5.8.11 Standard Approach

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because they always approached overseas markets in this way. Please note that this question was only asked to those operating a sales/distribution site or service delivery site.

Chart 5.8.11.1 You Always Approach Overseas Markets By Setting Up An Overseas Site

A significant minority of firms (24%) operate an overseas site because this is the way that they always do business overseas. However, well over half (57%) indicated that this has little or no bearing on their decision (i.e. scored 1-2 out of 5). 5.8.12 Avoid ‘Middle Man’

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because they did not want to reduce their profit margins by employing a ‘middle man’. Please note that this question was only asked to those operating a sales/distribution site or service delivery site.

Chart 5.8.12.1 You Don’t Want To Reduce Your Profit Margins By Employing A Middle Man

Although 37% of firms operating overseas sales or service delivery sites indicated that one of the key reasons for this was to retain profit by not employing a middle man (such as an agent or distributor), the same proportion felt that this had very little influence on their decision (i.e. scored 1-2 out of 5). 5.8.13 Protect Intellectual Property

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it was the best way to protect their intellectual property. Please note that this question was only asked to those operating a manufacturing site, sales/distribution site, service delivery site or R&D facility.

Chart 5.8.13.1 It Is The Best Way To Protect Your Intellectual Property

Over a third of firms viewed intellectual property protection as a significant reason for operating an overseas site (i.e. scored 4-5 out of 5). However, approaching half of firms with overseas sites indicated that this had little or no influence on them (i.e. 1-2 out of 5). 5.8.14 Quality & Customer Service

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it was the best way to ensure quality or customer service. Please note that this question was only asked to those operating a sales/distribution site or service delivery site.

Chart 5.8.14.1 It Is The Best Way To Ensure Quality Or Customer Service

Having an overseas sales or service delivery site is generally seen as beneficial in terms of ensuring quality or customer service, with over two-thirds of these firms indicating that this was an important reason for operating their site. 5.8.15 Product Development

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms were motivated to operate an overseas site because it was the best way to get the necessary product development done for customers in that market. Please note that this question was only asked to those operating an R&D facility.

Chart 5.8.15.1 It Is The Best Way To Get The Necessary Product Development Done For Customers In That Market

Perhaps surprisingly, only two-fifths of firms with an overseas R&D facility indicated that they were motivated by this being the best way to undertake the product development required for customers in that market. This suggests that for many of these firms there are other factors driving their decision and, as seen previously, the most widespread reasons for operating R&D facilities were because customers prefer a local presence and to enable an ‘on the ground’ customer support facility.

Please be aware that this analysis is based on just 25 firms that operate R&D sites (12 users and 13 non-users), so caution should be exercised when interpreting these results. 6. Profile

6.1 Age of Business

The chart below shows the profile of internationalising firms in terms of their age. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.1.1 When Business Established – By UKTI Usage

As detailed earlier, the overall sample frame for this study was stratified by age to ensure robust coverage of firms aged up to 5 years, firms aged 5-10 and firms more than 10 years old. The data was then weighted to the known profile of internationalising firms (based on data taken from the Annual Small Business Survey), and the overall profile of firms reflects this.

Overall, the age profile of UKTI users and non-users is very similar, although the former are slightly older (with 40% established more than 20 years compared to 32% of non-users). The table below shows this age data by firm size (measured via number of employees).

Table 6.1.1 When Business Established – By Size Of Firm

| Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |----------------------------|-----|-------|-------|---------|------| | Base | 536 | 251 | 45 | 31 | 23 | | Within the last 2 years | 6% | 2% | 1% | 2% | 2% | | 2-5 years ago | 17% | 7% | 4% | 2% | 0% | | 5-10 years ago | 27% | 22% | 16% | 9% | 0% | | 10-20 years ago | 30% | 24% | 15% | 14% | 9% | | More than 20 years ago | 20% | 45% | 64% | 74% | 89% |

Unsurprisingly, larger firms tend to be older than their smaller counterparts. However, it should be noted that a significant proportion of the smallest internationalising firms (with less than 10 employees) have been established for a considerable time (30% for between 10 and 20 years and 20% for over 20 years). 6.2 Size of Business (Employees)

The chart below shows the size profile of firms, measured via their number of employees. Analysis has been provided at the total level, and by UKTI users and non-users.

The majority of internationalising firms are relatively small in terms of staff numbers, with over half having less than 10 employees and most of the remainder having less than 50 employees. This reinforces the importance of considering the needs of smaller firms when formulating policy in the area of trade support.

UKTI users tend to be slightly larger than non-users, with 54% and 38% respectively having 10 or more employees. The table below shows firm size analysed by age.

Table 6.2.1 Number of Employees – By Age Of Firm

| Age (Years Trading) | Up to 5 | 6-10 | Over 10 | |---------------------|---------|------|---------| | Base | 236 | 256 | 411 | | Less than 10 | 77% | 65% | 46% | | 10-49 | 17% | 28% | 34% | | 50-99 | 2% | 4% | 8% | | 100-249 | 1% | 2% | 6% | | 250 or more | 0% | 0% | 5% | | Don’t know/refused | 3% | 2% | 1% |

Once again, the correlation between age and size of firm is highlighted. However, it should be noted that approaching half of the well-established internationalising firms (i.e. those trading for over 10 years) still have less than 10 employees. 6.3 Size of Business (Turnover)

The chart below shows the size profile of firms as measured by their annual turnover. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.3.1 Annual Turnover – By UKTI Usage

Over a third of internationalising firms have fairly modest turnovers of no more than £500,000, and only around 1 in 10 report sales in excess of £10million.

As was the case with employee numbers, UKTI users are also slightly larger in financial terms, with 31% reporting a turnover in excess of £2million compared to only 20% of non-users. The table below shows firm turnover analysed by both age and number of employees.

Table 6.3.1 Annual Turnover - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Up to £500,000 | 58% | 41% | 26% | 57% | 9% | 0% | 0% | 0% | | £500,000-£2million | 22% | 29% | 26% | 23% | 44% | 2% | 2% | 0% | | £2million-£10million | 7% | 10% | 18% | 6% | 25% | 48% | 16% | 9% | | £10million-£50million| 0% | 4% | 9% | 1% | 6% | 22% | 54% | 18% | | More than £50million | 0% | 1% | 4% | 0% | 0% | 9% | 14% | 40% | | Don't know/refused | 14% | 15% | 16% | 12% | 16% | 19% | 14% | 33% |

Unsurprisingly, there is a strong relationship between size measured by turnover and size measured by number of employees.

A similar relationship between turnover and age is also evident, with older firms more likely to have the larger turnovers of over £2million. However, it is certainly not the case that all older firms have large turnovers, with a quarter (26%) of those established more than 10 years reporting a turnover of £500,000 or less, and the same proportion (26%) reporting a turnover of between £500,000 and £2million. 6.4 Industry Sector

The chart below shows the profile of firms in terms of their industry sector, both at the total level and by UKTI usage. During the survey the data on sector was collected at the level of 1-digit SIC code, but for the purposes of this analysis it has been summarised into primary industries, production, construction and services.

Around two-thirds of internationalising firms are in the service sector, with almost all of the remainder operating in the production sector.

Interestingly, UKTI users are significantly more likely to operate in the production sector (46% vs. 29% of non-users), suggesting that these types of firms may have more need for export support. This data is fairly consistent with the main PIMS survey of UKTI users, which shows that 40% of users are in the production sector.(^6)

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(^6) PIMS 19-22 As seen below, there is some evidence that internationalising firms established over 10 years and those with at least 10 employees are more likely to be in the production sector than is the case for younger and smaller firms.

Table 6.4.1 Industry Sector - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Primary | 0% | 0% | 0% | 0% | 1% | 0% | 0% | 0% | | Production | 23% | 27% | 40% | 28% | 40% | 49% | 46% | 40% | | Construction | 1% | 1% | 2% | 0% | 4% | 0% | 0% | 0% | | Services | 76% | 72% | 57% | 71% | 55% | 51% | 54% | 60% | 6.5 Ownership

The table below provides an analysis of the ownership of firms in terms of whether they are domestically or foreign owned. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.5.1 Company Ownership – By UKTI Usage

The vast majority of internationalising firms are UK-owned, with only around 1 in 10 under foreign ownership (either wholly or partly). There is no difference between UKTI users and non-users in this respect.

As seen below, firms with 50 or more employees are considerably more likely to be foreign owned than their smaller counterparts.

Table 6.5.1 Company Ownership - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|--------|------|--------|-----|-------|-------|---------|------| | Base | | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | UK owned | | 93% | 93% | 87% | 95% | 88% | 62% | 69% | 69% | | Foreign owned | | 3% | 5% | 12% | 3% | 10% | 32% | 27% | 31% | | Joint UK & foreign owned | | 3% | 2% | 1% | 1% | 3% | 7% | 4% | 0% | 6.6 Experience of Doing Business Overseas

6.6.1 Number Of Years Doing Business Overseas

The chart below shows the experience profile of firms as measured by the length of time they have been involved in overseas business activity. Analysis has been provided at the total level, and by UKTI users and non-users.

As well as having a slightly older and larger profile than non-users, UKTI users also tend to be a little more experienced in overseas markets, with 75% having been doing business overseas for more than 5 years compared to 61% of non-users.

Only 2% of users are yet to start exporting (but planning to do so in the next year), compared to 7% of non-users. It should be noted that the main PIMS survey of UKTI users provides slightly different data in this respect, with 11% of users classified as ‘not yet exporting’(^7). However, this difference is likely to be due to the timing of the respective surveys in relation to when firms access UKTI support, with the PIMS survey conducted within 6 months of firms receiving support but the Internationalisation survey classifying firms as UKTI users if they indicate that they have used UKTI services in the past 5 years. As a result, the PIMS survey is likely to pick up some firms earlier in their overseas development (particularly if they are accessing support to help them start doing business overseas).

(^7) PIMS 19-22 The table below provides a comparison of the 2010 and 2011 Internationalisation survey results on export experience, and demonstrates that the profile has remained very consistent over time.

Table 6.6.1.1 Number Of Years Doing Business Overseas – Over Time

| | Total 2010 | Total 2011 | UKTI Users 2010 | UKTI Users 2011 | Non-Users 2010 | Non-Users 2011 | |----------------------|------------|------------|-----------------|-----------------|----------------|----------------| | **Base** | 902 | 903 | 235 | 248 | 667 | 655 | | Not yet exporting | 4% | 6% | 3% | 2% | 4% | 7% | | Less than 2 years | 12% | 12% | 8% | 10% | 13% | 12% | | 2-5 years | 20% | 17% | 16% | 13% | 21% | 19% | | 6-10 years | 25% | 23% | 30% | 27% | 24% | 22% | | 11-20 years | 20% | 22% | 20% | 22% | 21% | 22% | | More than 20 years | 17% | 20% | 22% | 25% | 16% | 18% | | Don't know/refused | 2% | 0% | 1% | 1% | 2% | 0% |

The following table below shows the 2011 survey data on the length of time firms have been involved in overseas business activity analysed by both size (measured by number of employees) and age.

Table 6.6.1.2 Number Of Years Doing Business Overseas - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | **Base** | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Not yet exporting | 14% | 6% | 3% | 8% | 5% | 0% | 2% | 0% | | Less than 2 years | 40% | 7% | 5% | 15% | 9% | 1% | 0% | 11% | | 2-5 years | 45% | 26% | 6% | 21% | 14% | 12% | 7% | 9% | | 6-10 years | 0% | 61% | 15% | 24% | 24% | 18% | 24% | 13% | | 11-20 years | 0% | 0% | 36% | 22% | 24% | 28% | 18% | 4% | | More than 20 years | 0% | 0% | 33% | 11% | 24% | 41% | 49% | 62% | | Don't know/refused | 0% | 0% | 1% | 0% | 1% | 0% | 0% | 0% |

Aside from the obvious fact that older firms have been doing business overseas for longer, the above analysis suggests when firms do internationalise they often do so reasonably early on. 45% of firms aged up to 5 years have been exporting for 2-5 years, 61% of firms aged 6-10 years have been exporting for 6-10 years, and 70% of firms aged over 10 years have been exporting for more than 10 years.

Similarly, there is a link between size and the length of time firms have been involved in overseas business activity, with smaller firms tending to have been involved in overseas business activity for a shorter period than the larger firms. 6.6.2 ‘Born Global’ Firms

Some younger firms have been classified as ‘born global’, based on whether they started doing business overseas from the outset. The details of the ‘born global’ definition, and the alternative tighter definition, are shown below.

| ‘Born Global’ Firms | |---------------------| | Firms have been defined as being ‘born global’ if they… | | • Have been established for 5 years or less | | • And have been doing business overseas for as long as they have been established | | Firms have been defined as being ‘born global’ under the alternative (tighter) definition if they… | | • Have been established for 5 years or less | | • And have been doing business overseas for as long as they have been established | | • And the proportion of turnover accounted for by overseas sales is over 25% |

The table below shows the proportions of firms classified as ‘born global’ via each of these definitions. Analysis has been provided based on all respondents and based just on younger firms.

| Table 6.6.2.1 Born Global Firms – By UKTI Usage | |-----------------------------------------------| | | All firms | Firms aged up to 5 years | | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | Base | 903 | 248 | 655 | 234 | 46 | 188 | | Born Global | 9% | 6% | 10% | 55% | 57% | 55% | | Born Global (alternative) | 4% | 3% | 4% | 22% | 30% | 20% | | Up to 5 years old but not Born Global | 8% | 5% | 9% | 45% | 43% | 45% | | Over 5 years old | 83% | 89% | 81% | - | - | - |

Overall, 9% of firms are classified as being ‘born global’ under the main definition and 4% under the tighter, alternative definition (equating to 55% and 22% respectively when based just on firms established in the last 5 years).

On the face of it, it looks as if UKTI users are less likely to be ‘born global’ than non-users (6% and 10% respectively). However, this is down to the slightly older profile of UKTI users, with this group containing fewer firms aged 5 years or less. When the analysis is based just on young firms, it is clear that UKTI users are equally likely to be classified as ‘born global’ by the main definition and appear more likely to be ‘born global’ under the alternative tighter definition (although it should be noted that this difference is not statistically significantly due to the low base sizes). As seen below, amongst firms established in the last 5 years, it appears that those with 10 or more employees are more likely to be ‘born global’.

Table 6.6.2.2 Born Global Firms – By Size (Up to 5 Years Old Only)

| | Firms aged up to 5 years | |--------------------------------|--------------------------| | | 0-9 emps | 10+ emps | | Base | 180 | 46 | | Born Global | 52% | 68% | | Born Global (alternative) | 22% | 27% | | Up to 5 years old but not Born Global | 48% | 32% | 6.6.3 Intermittent Exporters

As an additional indicator of export activity, firms were also asked whether they had made overseas sales every year since they started exporting or whether there had been some years with no overseas sales. Please note that this question was only asked to firms that had been doing business overseas for at least 2 years.

Chart 6.6.3.1 Whether Made Overseas Sales Every Year Since Starting Exporting – By UKTI Usage

Over a fifth of internationalising firms are ‘intermittent’ exporters, in the sense that they have not consistently made overseas sales since they started exporting. Whilst this is less likely to be the case amongst users of UKTI, a significant minority have still dipped in and out of overseas business. As seen below, smaller firms are more likely to be intermittent exporters. Interestingly, the same is true of older firms although this may be down to the fact that they tend to have been exporting for longer and hence have had a greater chance of experiencing a year without any overseas sales.

Table 6.6.3.1 Whether Made Overseas Sales Every Year Since Starting Exporting - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|--------|------|---------|-----|-------|-------|---------|------| | Base: All exporting 2 years or more | | 107 | 222 | 376 | 389 | 211 | 44 | 30 | 20 | | Some years with no overseas sales | | 13% | 23% | 22% | 26% | 18% | 14% | 9% | 10% | | Overseas sales every year | | 86% | 76% | 77% | 73% | 81% | 85% | 91% | 90% | | Don't know | | 1% | 1% | 1% | 1% | 1% | 2% | 0% | 0% |

Unsurprisingly, firms that are active in fewer markets are more likely to have experienced interruptions to their overseas business.

Table 6.6.3.2 Whether Made Overseas Sales Every Year Since Starting Exporting - By Number of Markets

| Number of Markets | Up to 5 | 6-10 | Over 10 | |-------------------|--------|------|---------| | Base: All exporting 2 years or more | 281 | 158 | 258 | | Some years with no overseas sales | 39% | 21% | 4% | | Overseas sales every year | 60% | 79% | 94% | | Don't know | 1% | 0% | 1% |

The table below shows these results separately for ‘web only exporters’ (please refer to Section 5.3 for details). Whilst it was hypothesised that this group might be more likely to also be intermittent exporters, due to the less engaged nature of their overseas business, this does not appear to be the case (although the low base size for web only exporters should be taken into account).

Table 6.6.3.3 Whether Made Overseas Sales Every Year Since Starting Exporting - By Web Only Exporters

| Total (all firms) | Web only exporters | |-------------------|--------------------| | Base: All exporting 2 years or more | 705 | 24 | | Some years with no overseas sales | 22% | 25% | | Overseas sales every year | 78% | 75% | | Don't know | 1% | 0% | 6.6.4 Number Of Markets

The chart below shows the number of overseas markets firms have done business in over the last 5 years. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.6.4.1 Number of Markets Done Business in During Last 5 Years – By UKTI Usage

Over half of internationalising firms have done business in more than five markets over the last five years, with a third indicating that they are active in more than 10.

Users of UKTI clearly have more overseas experience in this respect, with 45% having done business in more than 10 markets compared to only 28% of non-users. As seen below, the number of markets firms operate in tends to increase in line with age and size.

Table 6.6.4.1 Number of Markets Done Business in During Last 5 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|--------|------|---------|-----|-------|-------|---------|------| | Base | | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | None | | 14% | 6% | 3% | 7% | 5% | 0% | 0% | 0% | | One | | 13% | 11% | 8% | 11% | 8% | 0% | 4% | 4% | | 2-5 | | 33% | 33% | 31% | 35% | 28% | 17% | 27% | 16% | | 6-10 | | 17% | 18% | 21% | 20% | 22% | 16% | 16% | 18% | | More than 10 | | 22% | 30% | 36% | 25% | 36% | 63% | 54% | 60% | | Don’t know/refused | | 1% | 2% | 0% | 1% | 0% | 4% | 0% | 0% |

Firms were also asked whether they expected the number of markets they were doing business in to increase, decrease or stay the same over the next 3 years.

Chart 6.6.4.2 Whether Number of Markets Will Increase, Decrease or Stay the Same Over Next 3 Years – By UKTI Usage

Almost half of firms expect to expand into more markets over the next 3 years, with only a very small minority (3%) expecting a decline in this respect. Users of UKTI are significantly more ambitious in terms of their plans for market entry, with almost two-thirds expecting to expand into new markets over the next 3 years, compared to just two-fifths of non-users.

The table below shows the expected change in number of markets, analysed by both age and size.

Table 6.6.4.2 Whether Number of Markets Will Increase, Decrease or Stay the Same Over Next 3 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|-----|-------|-------|---------|------| | Up to 5 | 236 | 536 | 251 | 45 | 31 | 23 | | 6-10 | 256 | 44% | 48% | 55% | 57% | 76% | | Over 10 | 411 | 41% | 42% | 43% | 41% | 20% | | Not yet exporting | 14% | 7% | 5% | 0% | 0% | 0% | | Increase | 58% | 44% | 48% | 55% | 57% | 76% | | Stay the same | 26% | 41% | 42% | 43% | 41% | 20% | | Decrease | 1% | 3% | 3% | 2% | 0% | 0% | | Don't know/refused | 1% | 4% | 3% | 2% | 0% | 2% |

Although older firms tend to be active in a greater number of markets, it is younger firms that are more positive in terms of their growth plans, with 58% of firms established in the last 5 years expecting to enter new markets, compared to less than half of older firms.

Interestingly, a different picture is seen when it comes to size of firm, with larger firms more likely to anticipate an increase in the number of markets they operate in over the next 3 years. 6.6.5 Regions

The chart below shows the experience profile of firms as measured by the regions in which they have done business over the last 5 years. Analysis has been provided at the total level, and by UKTI users and non-users.

Table 6.6.5.1 Regions Currently Doing Business In – By UKTI Usage

| Regions | Total | UKTI Usage | |--------------------------|-------|------------| | | Base | UKTI User | Non-User | | | 903 | 248 | 655 | | Europe | 86% | 90% | 84% | | North America | 53% | 62% | 50% | | South & Latin America | 28% | 32% | 26% | | Middle East & Africa | 50% | 63% | 45% | | Asia Pacific | 51% | 67% | 45% | | Not yet exporting | 6% | 2% | 7% | | Don't know | 0% | 1% | 0% |

The vast majority of internationalising firms are doing business in Europe, and around half are operating in North America, the Middle East/Africa and the Asia Pacific region. However, only around a quarter are active in South or Latin American markets.

UKTI users are more likely to be doing business in each of these regions. Linked to this, they tend to be active in a significantly greater number of regions, with 25% doing business in all 5 regions of the world, compared to 16% of non-users. As seen below, the older and larger a firm is the more geographic areas they tend to be operating in.

Table 6.6.5.2 Regions Currently Doing Business In - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Regions | Number of Regions | |---------------------|-----------------------------|---------|-------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | None/not exporting | One | Two | Three | Four | Five | Don't know | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | 14% | 30% | 18% | 15% | 10% | 12% | 1% | | Europe | 75% | 84% | 90% | 82% | 90% | 97% | 100% | 91% | 14% | 30% | 18% | 15% | 10% | 12% | 1% | | North America | 43% | 54% | 56% | 50% | 57% | 58% | 51% | 71% | 6% | 26% | 20% | 18% | 16% | 13% | 0% | | South & Latin America| 16% | 23% | 32% | 22% | 33% | 41% | 30% | 49% | 3% | 21% | 18% | 19% | 15% | 13% | 0% | | Middle East & Africa| 36% | 44% | 57% | 45% | 56% | 65% | 49% | 76% | 7% | 20% | 15% | 17% | 13% | 14% | 0% | | Asia Pacific | 42% | 46% | 56% | 44% | 61% | 65% | 52% | 78% | 5% | 17% | 15% | 19% | 17% | 14% | 0% | | Not yet exporting | 14% | 6% | 3% | 7% | 5% | 0% | 0% | 0% | 14% | 30% | 18% | 15% | 10% | 12% | 1% | | Don't know | 1% | 0% | 0% | 1% | 0% | 0% | 0% | 0% | 1% | 0% | 0% | 0% | 0% | 0% | 0% |

OMB Research Ltd 2011 Internationalisation Report – D3 75 6.6.6 Proportion Of Turnover Accounted For By Overseas Sales

The chart below shows firms' experience as measured by the proportion of their turnover that is accounted for by overseas sales. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.6.6.1 Proportion Of Turnover Accounted For By Overseas Sales – By UKTI Usage

In line with the fact that they have generally been doing business overseas for longer and operate in more markets, users of UKTI also report that a significantly greater proportion of their turnover is accounted for by overseas sales than is the case for non-users. Interestingly, there are no clear or consistent differences by age or size of firms in terms of the proportion of turnover accounted for by overseas sales. It is worth noting that a significant minority of young and small firms are extremely reliant on exports, with 19% of firms established in the last 5 years and 21% of those with less than 10 employees indicating that overseas sales account for more than half of their revenues.

Table 6.6.6.1 Proportion Of Turnover Accounted For By Overseas Sales - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|-----|-------|-------|---------|------| | Up to 5 | 236 | 536 | 251 | 45 | 31 | 23 | | 6-10 | 256 | 411 | | | | | | Over 10 | | | | | | | | Base | | | | | | | | Zero | 16% | 9% | 6% | 3% | 5% | 0% | | Less than 10% | 38% | 41% | 42% | 41% | 33% | 35% | | 11%-25% | 15% | 14% | 12% | 11% | 14% | 25% | | 26%-50% | 8% | 14% | 12% | 11% | 13% | 25% | | 51%-75% | 12% | 11% | 11% | 11% | 12% | 18% | | More than 75% | 7% | 9% | 11% | 10% | 8% | 13% | | Don't know/refused | 3% | 6% | 6% | 4% | 8% | 6% |

Table 6.6.6.1 Proportion Of Turnover Accounted For By Overseas Sales - By Age & Size Firms were also asked whether they expected the proportion of turnover accounted for by overseas sales to increase, decrease or stay the same over the next 3 years.

Chart 6.6.6.2 Whether Proportion of Turnover Accounted for by Overseas Sales will be Higher, Lower or Same in a Year's Time – By UKTI Usage

Overall, 41% of firms expect overseas sales to become more important to their business over the next year, with only 6% anticipating that they will account for a lower proportion of turnover than they do currently. This mirrors the results on whether firms expect to increase the number of market they operate in, when 48% thought that this would be the case and only 3% felt that the number of markets they operated in would decline (as seen in section 6.6.4).

UKTI users are more ambitious in their plans for overseas growth, with 50% expecting an increase in the proportion of turnover coming from overseas sales compared to just 37% of non-users. The table below demonstrates that there are no significant differences by age or size of firms in this respect.

Table 6.6.6.2 Whether Proportion of Turnover Accounted for by Overseas Sales will be Higher, Lower or Same in a Year’s Time - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|-----------------------------|--------|------|---------|-----|-------|-------|---------|------| | Base | | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Not yet exporting | | 14% | 6% | 3% | 7% | 5% | 0% | 0% | 0% | | Higher | | 43% | 45% | 39% | 38% | 41% | 56% | 48% | 53% | | About the same | | 34% | 38% | 50% | 45% | 48% | 36% | 47% | 38% | | Lower | | 8% | 7% | 5% | 8% | 4% | 7% | 0% | 4% | | Don't know/refused | | 2% | 5% | 2% | 2% | 3% | 2% | 6% | 4% | 6.6.7 Internal Expertise

Internationalising firms were also asked a number of questions to establish the level of overseas experience they had amongst staff in their business. They were first asked whether any of their staff had significant experience of doing business overseas before they joined the firm and, if so, whether this experience related to business contacts or expertise. They were also asked whether any of the company owners, partners or directors were born overseas.

Table 6.6.7.1 Internal Overseas Expertise – By UKTI Usage

| | Total | UKTI Usage | | | |--------------------------------|-------|------------|----------|----------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Whether employ staff with previous overseas experience | | | | | | Yes | 29% | 37% | 26% | | - Business contacts | 22% | 31% | 19% | | - Expertise in doing business overseas | 27% | 36% | 23% | | No | 70% | 61% | 74% | | Don't know | 1% | 1% | 1% | | Whether any owners, partners or directors were born overseas | | | | | | Yes | 25% | 24% | 26% | | No | 72% | 74% | 72% | | Don't know | 2% | 2% | 2% |

Overall, 29% of firms employ staff that gained significant overseas experiences while working elsewhere, and in most cases this experience relates to both contacts and expertise. UKTI users are significantly more likely to have this type of internal resource.

A quarter of firms indicated that one or more of their owners, partners or directors was born overseas, and there is no difference between users and non-users in this respect. As seen below, larger firms are much more likely to have employees with previous export experience, which is unsurprising given that they have a greater number of staff. They are also more likely to have overseas-born owners, partners or directors. However, there is no difference in these areas by age of firm.

Table 6.6.7.2 Internal Overseas Expertise - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Whether employ staff with previous overseas experience | | | | Yes | 32% | 30% | 28% | 24% | 29% | 47% | 48% | 60% | | - Business contacts | 26% | 23% | 21% | 17% | 21% | 40% | 43% | 56% | | - Expertise in doing business overseas | 30% | 28% | 25% | 21% | 29% | 47% | 37% | 60% | | No | 68% | 69% | 71% | 76% | 69% | 50% | 49% | 40% | | Don't know | 0% | 1% | 1% | 0% | 2% | 3% | 4% | 0% | | Whether any owners, partners or directors were born overseas | | | | Yes | 29% | 26% | 24% | 23% | 23% | 45% | 36% | 40% | | No | 70% | 73% | 73% | 76% | 75% | 50% | 54% | 47% | | Don't know | 1% | 1% | 3% | 1% | 2% | 5% | 11% | 13% | The table below compares the profile of firms that have overseas-born owners, partners or directors and those that do not.

Table 6.6.7.3 Profile – By Whether Have Overseas Born Senior Management

| Profile | Overseas-Born Owners, Partners or Directors | |--------------------------------|---------------------------------------------| | | Yes | No | | **Base** | 233 | 652 | | **Age** | | | | 0-5 years | 20% | 16% | | 6-10 years | 24% | 24% | | Over 10 years | 57% | 60% | | **Size (employees)** | | | | 0-9 employees | 50% | 58% | | 10-249 employees | 43% | 38% | | 250+ employees | 5% | 2% | | **Sector** | | | | Primary | 0% | 1% | | Production | 26% | 36% | | Construction | 1% | 2% | | Services | 73% | 61% | | **Ownership** | | | | UK | 67% | 98% | | Foreign/joint UK & foreign | 33% | 2% | | **Innovation** | | | | Innovative | 74% | 71% | | Innovative (alternative) | 50% | 46% | | IP active | 28% | 21% | | **Overseas experience** | | | | Less than 2 years | 18% | 17% | | 2-10 years | 33% | 43% | | Over 10 years | 48% | 39% | | **Number of markets** | | | | Up to 5 markets | 43% | 48% | | 6-10 markets | 23% | 19% | | Over 10 markets | 33% | 32% | | **Growth objectives (next 5 years)** | | | | Grow substantially | 35% | 25% | | Grow moderately | 54% | 54% | | Same/smaller | 8% | 18% | | **Internationalisation modes used** | | | | Selling direct | 87% | 87% | | Agents/distributors | 46% | 40% | | Contractual arrangements | 16% | 9% | | Overseas sites | 29% | 9% |

As would be expected, firms with overseas-born members of their senior management team are considerably more likely to be foreign owned. They also tend to be slightly larger and are more likely to have been doing business overseas for in excess of 10 years, although there is no difference in the number of markets they are active in.

Whilst there is no difference in the proportion defined as innovative between firms with overseas-born senior management and those without, the former are more likely to be IP active. It is also the case that they are more inclined to do business overseas through contractual arrangements or via their own overseas sites. They also have more ambitious growth objectives. 6.7 Innovation

6.7.1 ‘Innovative’ Firms

Information on the engagement of employees in R&D and new product or service development activity, externally commissioned product or service development and sales of new products and services has been used to classify firms as either ‘innovative’ or ‘non-innovative’. The details of the ‘innovative’ definition, and the alternative tighter definition, are shown below.

| ‘Innovative’ Firms | |-------------------| | Firms have been defined as ‘innovative’ if they… | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product/service development | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years except firms established in the last 2 years |

Firms have been defined as ‘innovative’ under the alternative, tighter definition if they …

| • Have more than one employee engaged in R&D activity and more than one employee engaged in new product or service development and at least some employees are involved in the development of scientific or technical knowledge not commonly available | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years and these are ‘new to the world’ or ‘new to the sector’ |

The table below shows the proportions of firms classified as ‘innovative’ via each of these definitions. Comparative results have also been provided for UKTI users from the main PIMS surveys.

| Table 6.7.1.1 Innovative Firms – By UKTI Usage | |-----------------------------------------------| | | Total | UKTI Usage | UKTI Users (PIMS 19-22) | | | | UKTI User | Non-User | | | Base | 903 | 248 | 655 | 4057 | | Innovative | 72% | 86% | 66% | 83% | | Innovative (alternative) | 47% | 64% | 40% | 63% |

Approaching three-quarters of internationalising firms are classified as being innovative by the main definition, although this falls to 47% when the tighter, alternative definition is employed.

UKTI users are significantly more likely to be innovative than non-users, irrespective of which definition is used. Results for users are very consistent with those from the main PIMS surveys, demonstrating that the Internationalisation survey provides a good representation of UKTI users. The table below shows the proportion of firms classified as being innovative, analysed by both age and size.

Table 6.7.1.2 Innovative Firms - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Innovative | Innovative (alternative) | |---------------------|-----------------------------|------|------------|-------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Innovative | 66% | 75% | 72% | 66% | 78% | 82% | 84% | 93% | | Innovative (alternative) | 46% | 48% | 46% | 44% | 47% | 54% | 50% | 71% |

It is clear that the larger a firm is (in terms of employee numbers), the more likely it is to be innovative. There is also some evidence that firms established for at least 6 years are also more likely to be engaged in innovation activities. 6.7.2 IP Active Firms

Firms were asked to indicate whether or not they hold any patents or trademarks, either in the UK or overseas, for any of their products or services. This data has then been used to create a measure of ‘IP active’ firms, as detailed below.

| ‘IP Active’ Firms | |-------------------| | Firms have been defined as ‘IP Active’ if they… | | • Have applied for or obtained any patents, trademarks or other legal protection for their products or services, either in the UK or overseas |

If they held any IP protection, firms were also asked whether this related to the UK or overseas countries. The table below shows the proportions of firms classified as ‘IP active’, as well as details of the specific type of IP protection held, whether it relates to the UK or overseas markets, and whether firms have any triadic patents.

Table 6.7.2.1 IP Protection – By UKTI Usage

| | Total | UKTI Usage | |----------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 903 | 248 | 655 | | **IP Active** | | | | | Yes (IP active) | 23% | 38% | 17% | | No | 75% | 61% | 81% | | Don’t know | 2% | 1% | 2% | | **Type of IP Protection** | | | | | Patents | 10% | 20% | 7% | | Trademarks | 14% | 22% | 11% | | Other IP protection | 7% | 12% | 5% | | Not IP active | 77% | 62% | 83% | | **Geographical Coverage of IP Protection** | | | | | UK only | 5% | 7% | 4% | | Overseas only | 1% | 2% | 1% | | Both | 17% | 29% | 12% | | Not IP active | 77% | 62% | 83% | | **Triadic Patents** | | | | | Yes | 3% | 5% | 2% | | No | 97% | 95% | 98% |

Just under a quarter of internationalising firms have applied for or obtained some form of legal protection for any of their products or services, and are therefore defined as being IP active. The most common form of IP protection is trademarks, closely followed by patents, and the majority of those with IP protection indicate that this covers both the UK and some overseas markets. Only a very small minority of firms (3%) hold triadic patents.

______________________________________________________________________

8 A patent held for the same product or innovation in the USA, Europe and Japan. Reflecting the fact that they are more likely to be defined as innovative, UKTI users are also significantly more likely to be IP active. They are more likely to hold each type of IP protection, and are also more likely to have IP protection in overseas markets.

As seen below, smaller firms with less than 10 employees are least likely to be IP active. However, there is little difference in this respect by age of firm.

Table 6.7.2.2 IP Protection - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | IP Active | Type of IP Protection | Geographical Coverage of IP Protection | Triadic Patents | |---------------------|-----------------------------|-----------|-----------------------|---------------------------------------|-----------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | Yes (IP active) | No | Don’t know | Patents | Trademarks | Other IP protection | Not IP active | UK only | Overseas only | Both | Not IP active | Yes | No | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | 20% | 23% | 24% | 16% | 29% | 49% | 36% | 31% | 8% | 8% | 12% | 7% | 11% | 20% | 25% | 27% | | | | | | | | | | | 80% | 75% | 74% | 84% | 69% | 50% | 62% | 51% | 0% | 2% | 2% | 0% | 2% | 2% | 2% | 18% | | IP Active | | | | | | | | | 80% | 77% | 76% | 84% | 71% | 51% | 64% | 69% | 8% | 4% | 5% | 4% | 7% | 7% | 7% | 4% | | No | | | | | | | | | 97% | 97% | 97% | 98% | 98% | 95% | 96% | 91% | 3% | 3% | 3% | 2% | 2% | 5% | 4% | 9% | | Don’t know | | | | | | | | | 97% | 97% | 97% | 98% | 98% | 95% | 96% | 91% | 3% | 3% | 3% | 2% | 2% | 5% | 4% | 9% | Firms that operate their own overseas sites and those involved in contractual arrangements overseas (such as licensing, franchising or joint ventures) are most likely to hold IP protection.

Table 6.7.2.3 IP Protection - By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 784 | 363 | 105 | 194 | | IP Active | | | | | | Yes (IP active) | 24% | 30% | 38% | 45% | | No | 74% | 68% | 61% | 51% | | Don’t know | 1% | 2% | 2% | 4% | | Type of IP Protection | | | | | | Patents | 11% | 15% | 17% | 23% | | Trademarks | 15% | 17% | 24% | 32% | | Other IP protection | 8% | 8% | 9% | 10% | | Not IP active | 76% | 70% | 62% | 55% | | Geographical Coverage of IP Protection | | | | | | UK only | 6% | 4% | 3% | 3% | | Overseas only | 1% | 1% | 1% | 4% | | Both | 17% | 25% | 33% | 38% | | Not IP active | 76% | 70% | 62% | 55% | | Triadic Patents | | | | | | Yes | 3% | 5% | 8% | 8% | | No | 97% | 95% | 92% | 92% | 6.7.3 Young, Technology Intensive Firms

Some firms have been classified as ‘young, technology intensive’, and the details of this definition are shown below.

| ‘Young, Technology Intensive’ Firms | |-------------------------------------| | Firms have been defined as being ‘young, technology intensive’ if they… | | • Have been established for 5 years or less | | • And are classified as being innovative using the alternative (tighter) definition or are classified as IP active |

The table below shows the proportions of firms classified as ‘young, technology intensive’. Analysis has been provided based on all respondents and based just on younger firms.

Table 6.7.3.1 Young, Technology Intensive Firms – By UKTI Usage

| | All firms | Firms aged up to 5 years | |----------------------|-----------|--------------------------| | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | Base | 903 | 248 | 655 | 234 | 46 | 188 | | Young tech intensive | 9% | 9% | 9% | 53% | 77% | 47% | | Up to 5 years old but not young tech intensive | 8% | 3% | 10% | 47% | 23% | 53% | | Over 5 years old | 83% | 89% | 81% | - | - | - |

Overall, 9% of all internationalising firms are classified as being ‘young, technology intensive’, which equates to 53% of those established in the last 5 years.

Looking at the analysis based on all firms, it appears as if UKTI users and non-users are equally likely to be ‘young, technology intensive’. However, this is a function of the slightly older age profile of UKTI users, and when the analysis is based just on firms aged 5 years or less then it becomes very clear that UKTI users are significantly more likely to be ‘young, technology intensive’ (77% vs. 47% of non-users).

As seen below, amongst firms established in the last 5 years, there is no difference in the proportion of ‘young, technology intensive’ firms by number of employees.

Table 6.7.3.2 Young, Technology Intensive Firms – By Size (Up to 5 Years Old Only)

| | Firms aged up to 5 years | |----------------------|--------------------------| | | 0-9 emps | 10+ emps | | Base | 180 | 46 | | Young tech intensive | 53% | 55% | | Up to 5 years old but not young tech intensive | 47% | 45% | 6.8 Growth

6.8.1 Past Growth

Firms that had been in existence for at least three years were asked whether the number of people they currently employed was higher, lower or about the same than it had been three years ago. The chart below shows firms’ past growth profile, as determined by growth in employee numbers.

Chart 6.8.1.1 Whether Employee Numbers are Higher, Lower or Same as 3 Years Ago – By UKTI Usage

Just over a quarter of internationalising firms indicate that their employee numbers are higher than they were 3 years ago, but this is largely off-set by the 22% reporting that staffing levels have reduced over this time.

UKTI users are significantly more likely than non-users to report growth over the last 3 years, although similar proportions of both groups have become smaller over this period. To provide another perspective on past growth, firms were also asked whether, compared to this time three years ago, their turnover was higher, lower or about the same. The chart below shows firms’ past growth profile, as determined by growth in turnover.

Chart 6.8.1.2 Whether Turnover is Higher, Lower or Same as 3 Years Ago – By UKTI Usage

The picture in terms of turnover growth over the last 3 years is more positive than that based on employee numbers, with 44% of internationalising firms indicating that turnover has increased compared to 24% reporting a decline.

As well as demonstrating stronger growth in employee numbers, UKTI users have also out-performed non-users when it comes to turnover. The table below provides further analysis of the levels of both employee and turnover growth in the last 3 years.

Table 6.8.1.1 Employee & Turnover Growth in Last 3 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Employee Growth | Turnover Growth | |---------------------|-----------------------------|-----------------|-----------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Higher | 23% | 36% | 24% | 19% | 41% | 33% | 19% | 47% | | Same | 21% | 45% | 46% | 48% | 32% | 34% | 34% | 36% | | Lower | 4% | 19% | 28% | 20% | 23% | 31% | 41% | 18% | | Est. in last 3 years| 52% | 0% | 0% | 12% | 4% | 1% | 3% | 2% | | Don't know | 0% | 0% | 1% | 0% | 0% | 0% | 4% | 0% | | Higher | 32% | 55% | 44% | 36% | 55% | 62% | 51% | 57% | | Same | 7% | 19% | 22% | 21% | 15% | 17% | 21% | 27% | | Lower | 7% | 23% | 29% | 28% | 22% | 14% | 18% | 9% | | Est. in last 3 years| 52% | 0% | 0% | 12% | 4% | 1% | 3% | 2% | | Don't know | 2% | 3% | 4% | 3% | 4% | 5% | 7% | 4% |

There is no clear picture by age or size in terms of the proportion of firms that have grown over the last 3 years (in either employee or turnover terms). However, it does seem that older firms and larger firms are more likely to have reduced their employee numbers. Older firms are also more likely to report a decline in turnover over this period. 6.8.2 Future Growth

All firms were asked their opinions on their future growth, assessing their business as a whole. The chart below shows firms' growth objectives for the next five years.

Chart 6.8.2.1 Growth Objectives For Business Over Next 5 Years – By UKTI Usage

Whilst the majority of firms indicated that they expect to grow, most felt that this growth would be 'moderate' rather than 'substantial'.

UKTI users are significantly more likely to be planning growth (86% vs. 80% of non-users), but there is no difference in the proportion expecting 'substantial' growth. However, as seen earlier in this report, there are other indications that UKTI users are more dynamic in terms of their growth ambitions, with users significantly more likely to predict an increase in the number of markets they are doing business in and to predict an increase in the proportion of their turnover accounted for by overseas sales over the next 3 years. The table below provides a comparison with the 2010 Internationalisation Survey, and with the most recent PIMS surveys of users and non-users.

Table 6.8.2.1 Growth Objectives For Business Over Next 5 Years – Over Time

| | UKTI Users | Non-Users | PIMS Non-Users 2011 | |----------------------|------------|-----------|---------------------| | | 2011 Int Survey | 2010 Int Survey | PIMS 19-22 | 2011 Int Survey | 2010 Int Survey | PIMS Non-Users 2011 | | Base | 248 | 235 | 4057 | 655 | 667 | 300 | | Grow substantially | 29% | 31% | 42% | 27% | 23% | 25% | | Grow moderately | 58% | 55% | 47% | 52% | 59% | 53% | | Stay the same | 11% | 10% | 6% | 13% | 14% | 16% | | Become smaller | 1% | 1% | 1% | 3% | 2% | 3% | | Don’t know | 2% | 2% | 4% | 4% | 2% | 3% |

For users of UKTI, there has been a slight (but not statistically significant) decline in the proportion of firms expecting ‘substantial’ growth since the 2010 survey, and a corresponding increase in the proportion anticipating ‘moderate’ growth.

Whilst these results appear to contradict the PIMS user data, which reported that 42% of users expect ‘substantial’ growth, this is likely to be linked to the timing of the interviews in relation to when firms received UKTI support. The PIMS survey takes place c.6 months after firms access support, and it is likely that in some cases this support is driving firms’ growth predictions. In contrast, in the Internationalisation survey firms are defined as UKTI users if they have received UKTI support at any point in the last 5 years, so this ‘recent support’ impact is less likely to be a factor.

Amongst non-users of UKTI there has been a slight increase in the proportion expecting ‘substantial’ growth, but this apparent difference is not statistically significant. There has also been a corresponding decline in those predicting ‘moderate’ growth. The non-users figures are consistent with those collected in the PIMS Non-User survey.

The table below shows firms’ expectations in respect of future growth analysed by both age and size and demonstrates that young firms have the most ambitious growth objectives. However, there is no clear picture in this respect by size of firm.

Table 6.8.2.2 Growth Objectives For Business Over Next 5 Years - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|----------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Grow substantially | 47% | 35% | 19% | 26% | 30% | 31% | 32% | 27% | | Grow moderately | 45% | 52% | 57% | 53% | 54% | 58% | 56% | 69% | | Stay the same | 5% | 9% | 16% | 15% | 11% | 10% | 7% | 0% | | Become smaller | 0% | 2% | 4% | 3% | 2% | 0% | 0% | 0% | | Don’t know | 3% | 2% | 4% | 3% | 4% | 0% | 4% | 4% | 6.8.3 Innovative High Growth Firms

The survey data on innovation activity and growth objectives has been combined in the analysis to identify ‘innovative high growth firms’, as this is a key group for UKTI to target.

The table below provides analysis of the combined innovative and growth data, analysed at the total level and by UKTI usage.

Table 6.8.3.1 Innovation & Growth Objectives – By UKTI Usage

| | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Innovative & expect | 23% | 27% | 22% | | substantial growth | | | | | Innovative & expect | 40% | 50% | 36% | | moderate growth | | | | | Innovative & expect | 8% | 9% | 8% | | no growth or negative | | | | | growth | | | | | Non-innovative | 28% | 14% | 34% |

Overall 23% of internationalising firms are defined as being ‘innovative high growth’, with this rising slightly to 27% amongst UKTI users. However, it should be noted that 22% of those firms that do not use UKTI are still in this critical category, confirming that there are many ‘innovative high growth’ internationalising firms that UKTI are not yet reaching.

As seen below, older firms that have been established for more than 10 years are significantly less likely to be classified as ‘innovative high growth’. While there is little difference by size of firm in this respect, there is some evidence that firms with less than 10 employees are least likely to fall into this category.

Table 6.8.3.2 Innovation & Growth Objectives – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |--------------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Innovative & expect | 35% | 32% | 16% | 21% | 26% | 28% | 28% | 27% | | substantial growth | | | | | | | | | | Innovative & expect | 28% | 38% | 45% | 36% | 43% | 49% | 47% | 67% | | moderate growth | | | | | | | | | | Innovative & expect | 3% | 4% | 11% | 9% | 9% | 5% | 9% | 0% | | no/negative growth | | | | | | | | | | Non-innovative | 34% | 25% | 28% | 34% | 22% | 18% | 16% | 7% | 6.8.4 Growth (ASBS & OECD Definitions)

Further analysis of growth has been carried out, seeking to replicate, as far as is possible with the data available, an analysis of growth conducted for the Annual Small Business Survey (ASBS). For this analysis firms have been divided into four ‘growth categories’, taking account of both past and future growth. Furthermore, additional analysis has also been conducted seeking to replicate the OECD categories of growth (‘high growth’ firms and ‘gazelles’). Details of both these approaches are set out below.

| Growth – ASBS Definition | |--------------------------| | Firms have been classified as displaying ‘sustained growth’ if… | | • Their employee numbers have grown over the last 3 years | | • And, they are anticipating substantial growth over the next 5 years | | Firms have been classified as displaying ‘contained growth’ if… | | • Their employee numbers have grown over the last 3 years | | • But, they are not anticipating substantial growth over the next 5 years | | Firms have been classified as displaying ‘new growth’ if… | | • Their employee numbers have not grown over the last 3 years including firms established in the last 3 years | | • But, they are anticipating substantial growth over the next 5 years | | Firms have been classified as displaying ‘no growth’ if… | | • Their employee numbers have not grown over the last 3 years including firms established in the last 3 years | | • And, they are not anticipating substantial growth over the next 5 years |

| Growth – OECD Definition | |--------------------------| | Firms have been defined as ‘high-growth’ if… | | • Their employee numbers have grown by more than 75% over the last 3 years except firms established in the last 3 years | | • And, they are less than 5 years old | | Firms have been defined as ‘gazelles’ if… | | • Their employee numbers have grown by more than 75% over the last 3 years except firms established in the last 3 years | | • And, they are less than 5 years old | The table below provides analysis of growth under both the ASBS and OECD definitions.

Table 6.8.4.1 Growth (ASBS & OECD Definitions) – By UKTI Usage

| | Total | UKTI Usage | | | | | | | |------------------|-------|------------|----------|----------|----------|----------|----------|----------| | | | UKTI User | Non-User | | | | | | | Base | 903 | 248 | 655 | | | | | | | **ASBS Growth** | | | | | | | | | | Sustained growth | 12% | 17% | 10% | | | | | | | Contained growth | 15% | 21% | 12% | | | | | | | New growth | 16% | 12% | 17% | | | | | | | No growth | 57% | 50% | 60% | | | | | | | **OECD Growth** | | | | | | | | | | High growth | 11% | 14% | 10% | | | | | | | Gazelles | 3% | 3% | 2% | | | | | |

By the ASBS definition, 43% of internationalising firms are displaying growth (either sustained, contained or new). UKTI users do appear more likely to be growing, although the data suggests that they are less likely than non-users to be demonstrating ‘new growth’.

Based on the OECD categories, 11% of internationalising firms are classed as ‘high growth’ and just 3% as ‘gazelles’. There are no statistically significant differences between users and non-users in this respect.

The table below provides further analysis by age and size.

Table 6.8.4.2 Growth (ASBS & OECD Definitions) - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | | | | | | | |------------------|---------------------|----------------------------|----------|----------|----------|----------|----------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | **ASBS Growth** | | | | | | | | | | Sustained growth | 15% | 20% | 8% | 9% | 18% | 16% | 3% | 17% | | Contained growth | 9% | 16% | 16% | 10% | 23% | 18% | 16% | 27% | | New growth | 32% | 15% | 11% | 17% | 12% | 16% | 29% | 10% | | No growth | 44% | 49% | 64% | 64% | 47% | 51% | 53% | 47% | | **OECD Growth** | | | | | | | | | | High growth | 16% | 17% | 8% | 11% | 14% | 8% | 3% | 3% | | Gazelles | 16% | 0% | 0% | 3% | 2% | 2% | 0% | 0% |

Using the ASBS growth categories, firms that have been established more than 10 years and those with less than 10 employees are more likely to be exhibiting ‘no growth’. Older firms are also less likely to be classified as ‘high growth’ by the OECD definition. 6.9 Business Planning

Firms were asked to indicate whether or not they had a current, written business plan, with the following results.

Chart 6.9.1 Whether Have a Current, Written Business Plan

UKTI users appear to be more strategic in their approach than non-users, with three-quarters having a current written business plan compared to only around half of non-users.

As seen below, the larger the firm the more likely they are to have a plan. However there is no difference by age of firm in this respect.

Table 6.9.1 Whether Have a Current, Written Business Plan - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | | | | | | | | | | Yes | 58% | 61% | 58% | 50% | 67% | 74% | 73% | 91% | | No | 39% | 36% | 38% | 49% | 27% | 18% | 22% | 0% | | Don't know | 3% | 3% | 4% | 1% | 6% | 8% | 5% | 9% | Those firms that had a business plan were also asked to specify the time period that it covered, with the following results. Please note that this analysis is just based on those firms that had a plan.

Table 6.9.2 Period Covered By Business Plan – By UKTI Usage

| | Total | UKTI Usage | | | | | | | |----------------------|-------|------------|----------|----------|----------|----------|----------|----------| | | | UKTI User | Non-User | | | | | | | Base: All with business plan | 531 | 186 | 345 | | | | | | | The next year | 24% | 24% | 24% | | | | | | | 2 years | 13% | 10% | 15% | | | | | | | 3 years | 24% | 25% | 23% | | | | | | | Up to 5 years | 29% | 31% | 27% | | | | | | | Up to 10 years | 3% | 3% | 3% | | | | | | | More than 10 years | 1% | 1% | 1% | | | | | | | Don’t know/refused | 6% | 6% | 7% | | | | | |

As detailed above, it is very rare for business plans to cover a period greater than 5 years. Interestingly, a quarter of business plans are very short term in their focus, only covering the next 12 months.

Although users of UKTI are more likely to have a business plan, amongst those that do there is no real difference between users and non-users in terms of the length of time that the plan covers.

As seen below, there are no consistent differences by age or size of firm when it comes to the period covered by their business plans, although there is some suggestion that smaller firms with less than 50 employees tend to plan less far ahead.

Table 6.9.3 Period Covered By Business Plan - By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | | | | | | | |----------------------|---------------------|-----------------------------|----------|----------|----------|----------|----------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base: All with plan | 137 | 157 | 237 | 276 | 171 | 33 | 22 | 21 | | The next year | 20% | 26% | 24% | 28% | 25% | 11% | 10% | 24% | | 2 years | 18% | 14% | 12% | 17% | 11% | 9% | 8% | 10% | | 3 years | 31% | 22% | 22% | 24% | 20% | 19% | 48% | 20% | | Up to 5 years | 26% | 31% | 28% | 26% | 31% | 47% | 26% | 22% | | Up to 10 years | 1% | 2% | 4% | 2% | 4% | 3% | 5% | 0% | | More than 10 years | 0% | 1% | 1% | 2% | 0% | 0% | 0% | 0% | | Don’t know/refused | 5% | 5% | 8% | 2% | 9% | 11% | 3% | 24% | 6.10 Customer Types

Firms were asked to indicate whether their overseas customers were businesses or individuals (i.e. consumers). Those firms that sold to overseas businesses were asked whether these business customers were the ‘end users’ of their products or services or whether they were part of the supply chain (i.e. they sold the products on to others, in either the same or modified form). This data has been combined with the other data on customer types to provide details of the proportion of internationalising firms selling direct to end users and selling into supply chains. These results are detailed below.

Table 6.10.1 Customer Types – By UKTI Usage

| Customer Types | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Customer Types | | | | | Businesses | 50% | 62% | 45% | | Individuals | 10% | 3% | 13% | | Both | 33% | 32% | 34% | | Other | 1% | 1% | 1% | | Don’t know | 0% | 1% | 0% | | Not exporting/no overseas sales| 6% | 2% | 7% | | Summary | | | | | End users | 70% | 72% | 69% | | Supply chain | 58% | 69% | 54% | | Don’t know | 1% | 1% | 1% | | Not exporting/no overseas sales| 6% | 2% | 7% |

The majority of internationalising firms (83%) sell to overseas businesses, either exclusively or as well as selling to individuals. Interestingly, it seems that UKTI users are more likely to sell to businesses (94% vs. 79% of non-users).

Overall, 70% of internationalising firms sell directly to end users and a slightly lower proportion (58%) selling into overseas supply chains (with around a third of firms doing both). UKTI users are slightly more likely to be selling into supply chains. Older business established for more than 5 years are slightly more likely to be selling to overseas businesses, and the same is true of firms with more than 10 staff. Older firms are also more likely to sell to both end users and into overseas supply chains. There is also some evidence that small firms are less likely to sell into supply chains.

Table 6.10.2 Customer Types – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|-----|-------|-------|---------|------| | Up to 5 | 236 | 536 | 45 | 31 | 23 | | 6-10 | 256 | 251 | 45 | 31 | 23 | | Over 10 | 411 | 536 | 45 | 31 | 23 |

Customer Types

| Customer Types | Businesses | Individuals | Both | Other | Don't know | Not exporting/no overseas sales | |----------------|------------|-------------|------|-------|------------|--------------------------------| | | 42% | 8% | 35% | 1% | 0% | 14% | | | 55% | 7% | 32% | 0% | 0% | 6% | | | 50% | 12% | 34% | 0% | 0% | 3% | | | 46% | 13% | 33% | 0% | 0% | 7% | | | 52% | 7% | 35% | 1% | 1% | 5% | | | 67% | 1% | 30% | 1% | 0% | 0% | | | 57% | 4% | 39% | 0% | 0% | 0% | | | 62% | 4% | 29% | 4% | 0% | 0% |

Summary

| Summary | End users | Supply chain | Don't know | Not exporting/no overseas sales | |---------|-----------|--------------|------------|--------------------------------| | | 62% | 54% | 0% | 14% | | | 73% | 54% | 1% | 6% | | | 71% | 62% | 1% | 3% | | | 73% | 52% | 0% | 7% | | | 64% | 64% | 0% | 5% | | | 68% | 76% | 0% | 1% | | | 62% | 84% | 0% | 4% | | | 78% | 64% | 0% | 0% |

Firms that sell direct are comparatively more likely to only sell to individuals overseas (rather than businesses), but this is still only the case for a small minority of these firms. Those firms that use agents or distributors overseas are most likely to be selling into supply chains.

Table 6.10.3 Customer Types – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 784 | 363 | 105 | 194 |

Customer Types

| Customer Types | Businesses | Individuals | Both | Other | Don't know | Not exporting/no overseas sales | |----------------|------------|-------------|------|-------|------------|--------------------------------| | | 51% | 52% | 47% | 63% | 5% | 5% | | | 11% | 5% | 3% | 5% | 1% | 1% | | | 33% | 38% | 35% | 25% | 1% | 1% | | | 0% | 1% | 3% | 1% | 0% | 0% | | | 0% | 0% | 1% | 1% | 0% | 0% | | | 5% | 4% | 10% | 6% | 5% | 4% |

Summary

| Summary | End users | Supply chain | Don't know | Not exporting/no overseas sales | |---------|-----------|--------------|------------|--------------------------------| | | 72% | 58% | 1% | 5% | | | 67% | 73% | 2% | 4% | | | 64% | 63% | 3% | 10% | | | 68% | 52% | 2% | 6% |

| | 68% | 52% | 2% | 6% | 6.11 Profile of UKTI Users: Internationalisation Survey vs. PIMS

The Internationalisation Survey involves interviewing a random sample of UK firms that are involved in (or seriously considering) overseas business, and as such it includes both users and non-users of UKTI’s services. UKTI also have a wealth of information on users from the on-going Performance & Impact Monitoring Survey, which involves contacting c.1,000 supported firms every quarter. The table below provides a comparison of key profile variables from the two surveys.

Table 6.11.1 Profile of UKTI Users – Internationalisation Survey vs. PIMS

| UKTI Users | Internationalisation Survey 2010 | PIMS 19-22 | |------------|----------------------------------|------------| | Base | 248 | 4057 | | Age | | | | 0-5 years | 12% | 25% | | 6-10 years | 24% | 17% | | Over 10 years | 64% | 58% | | Size (employees) | | | | 0-9 employees | 45% | 39% | | 10-249 employees | 47% | 45% | | 250+ employees | 7% | 12% | | Sector | | | | Primary | 0% | 0% | | Production | 46% | 40% | | Construction | 1% | 2% | | Services | 53% | 58% | | Innovation | | | | Innovative | 86% | 83% | | Innovative (alternative) | 64% | 63% | | IP active | 38% | 38% | | Overseas experience | | | | Less than 2 years | 12% | 25% | | 2-10 years | 40% | 33% | | Over 10 years | 48% | 41% | | Growth objectives (next 5 years) | | | | Grow substantially | 29% | 42% | | Grow moderately | 58% | 47% | | Same/smaller | 12% | 7% | | Business plan | | | | Yes | 74% | 75% | | No | 25% | 22% |

In terms of their physical profile, UKTI users interviewed in PIMS tend to be slightly younger than those interviewed in the Internationalisation Survey. However, the sector profile is identical for both groups and the size profile is also similar.

PIMS users are more likely to be new to exporting and to have more ambitious growth objectives. Both of these differences are likely to be due to the PIMS research covering firms that have received support in the last 6 months, but the Internationalisation Survey classifying firms as ‘users’ if they have received support in the last 5 years. As such, the PIMS survey is more likely to include firms that are accessing support to help them start exporting. Similarly, PIMS is also more likely to capture firms that are actively seeking to grow at the time of the interview (and are using UKTI services to help achieve this), whereas the UKTI users identified in the Internationalisation Survey may have passed that stage some years ago and now be less dynamic in their approach. 7. Awareness & Usage

7.1 Awareness & Use of UKTI

All firms were asked whether, prior to the interview, they had heard of either UK Trade & Investment or the commercial services provided by British embassies and consulates overseas. If so, they were also asked whether they had used either of these. The table below provides details of awareness and usage levels, at the total level and by UKTI usage.

| Base | Total | UKTI Usage | |------|-------|------------| | | | UKTI User | Non-User | | Aware (at least one) | 903 | 248 | 655 | | - UK Trade & Investment or UKTI | 71% | 100% | 60% | | - Commercial services provided by embassies and consulates overseas | 53% | 87% | 39% | | Used (at least one) | 29% | 100% | 0% | | - UK Trade & Investment or UKTI | 22% | 76% | 0% | | - Commercial services provided by embassies and consulates overseas | 18% | 63% | 0% |

Overall, around 71% of internationalising firms had heard of either UKTI or the services provided by overseas posts. Awareness of the UKTI name stands at only 53%, with a marginally higher awareness level (56%) recorded for the services provided by overseas posts, indicating that a significant number of firms who knew of the posts’ services were still unaware of UKTI itself.

Over a quarter of firms (29%) claim to have used UKTI. However, it should be noted that this figure may under-represent UKTI usage as the respondent interviewed may not be aware that this is the case (e.g. if the firm used UKTI before the respondent joined the firm, or if a different site/department has used UKTI). That said, it is also possible that UKTI users are over-represented in the sample due to the effect of response bias, as the survey was positioned as being on behalf of UKTI so those firms with a prior relationship with the organisation may have been more willing to take part in the research.

UKTI ‘users’ were defined as those that have used either UKTI services or the commercial services provided by British embassies and consulates overseas. It is interesting to note that only 87% of UKTI users have actually heard of ‘UK Trade & Investment’ itself, meaning that 13% have used the services provided by overseas posts but not realised the link to UKTI. Although awareness amongst non-users stands at 60%, this does mean that there are a significant number of internationalising firms that could benefit from UKTI’s services but have never heard of the organisation.

It is also worth noting that in addition to the 18% of firms that had received support from overseas embassies or consulates, a further 1% indicated that they had attempted to do so but were not given any help. The table below provides details of awareness and usage levels over time. Please note that it is not possible to provide comparable usage data from 2008 due to questionnaire changes, and there is also no data on usage of UKTI and overseas posts specifically from either the 2008 or 2010 survey.

Table 7.1.2 Awareness & Use of UKTI – Over Time

| | Internationalisation Survey | |----------------------|----------------------------| | | 2008 | 2010 | 2011 | | **Base** | 900 | 902 | 903 | | Aware (at least one) | 68% | 68% | 71% | | - UK Trade & Investment or UKTI | 51% | 51% | 53% | | - Commercial services provided by embassies and consulates overseas | 55% | 53% | 56% | | Used (at least one) | N/A | 27% | 29% | | - UK Trade & Investment or UKTI | N/A | N/A | 22% | | - Commercial services provided by embassies and consulates overseas | N/A | N/A | 18% |

Having remained constant at 68% in 2008 and 2010, there is some evidence that awareness of UKTI has increased in 2011 (to 71%), although it should be noted that this rise is not statistically significant. It seems that this rise in awareness is driven by a combination of increased knowledge of UKTI itself and increased knowledge of the services provided by overseas posts, both of which have seen a small (but not statistically significant) rise since 2010.

Reflecting the situation with awareness, the data suggests that the proportion of internationalising firms actually using UKTI services has also risen over the last year, although again this apparent increase is not statistically significant.

As seen below, awareness and use of UKTI increases amongst firms with more employees. Awareness also rises amongst older firms, but there is no difference in usage by this criteria.

Table 7.1.3 Awareness & Use of UKTI – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | **Base** | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Aware | 65% | 71% | 73% | 70% | 71% | 76% | 79% | 84% | | - UKTI | 58% | 54% | 51% | 51% | 54% | 56% | 54% | 76% | | - Posts | 43% | 52% | 62% | 54% | 56% | 69% | 65% | 80% | | Used | 29% | 30% | 31% | 23% | 34% | 34% | 34% | 58% | | - UKTI | 15% | 23% | 23% | 17% | 27% | 26% | 27% | 36% | | - Posts | 12% | 17% | 20% | 13% | 23% | 27% | 14% | 53% | As might be expected, the longer a firm has been doing business overseas and the more markets they operate in, the more likely they are to have heard of UKTI and to have used their services. That said, over a fifth (22%) of firms that have been doing business overseas for more than 10 years and a quarter (25%) of those operating in more than 10 markets are still not aware of UKTI.

Table 7.1.4 Awareness & Use of UKTI – By Experience

| Years Exporting | Number of Markets | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | |-----------------|-------------------|-------------------|------------|---------------|--------|------|-------------| | Base | | 198 | 415 | 287 | 441 | 174 | 279 | | Aware | | 63% | 68% | 78% | 67% | 77% | 75% | | - UKTI | | 50% | 52% | 55% | 48% | 52% | 60% | | - Posts | | 47% | 50% | 67% | 50% | 64% | 61% | | Used | | 19% | 28% | 33% | 19% | 34% | 40% | | - UKTI | | 14% | 23% | 24% | 15% | 25% | 30% | | - Posts | | 12% | 16% | 23% | 10% | 21% | 28% |

There is a similar correlation between the number of regions firms are doing business in and the likelihood of them being aware of, and using, UKTI. Encouragingly, 60% of firms that are not yet exporting (i.e. are not currently doing business in any overseas regions) are still aware of UKTI or the services provided by overseas posts.

Table 7.1.5 Awareness & Use of UKTI – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |-------------------------------------|------|-----|-----|-------|------|------| | Base | 61 | 224 | 168 | 164 | 126 | 157 | | Aware | 60% | 66% | 73% | 73% | 72% | 78% | | - UKTI | 47% | 43% | 58% | 54% | 53% | 61% | | - Posts | 40% | 49% | 57% | 61% | 56% | 66% | | Used | 10% | 16% | 32% | 32% | 36% | 38% | | - UKTI | 7% | 11% | 26% | 24% | 29% | 28% | | - Posts | 7% | 12% | 13% | 20% | 24% | 28% |

There is also clear evidence that innovative and IP active firms are more engaged with UKTI, with both awareness and usage levels higher amongst these groups.

Table 7.1.6 Awareness & Use of UKTI – By Innovation

| Innovative | Yes (alternative) | Yes | No | Yes | No | |------------|-------------------|-----|----|-----|----| | Base | 421 | 643 | 260| 204 | 685| | Aware | 80% | 75% | 61%| 83% | 68%| | - UKTI | 65% | 59% | 38%| 71% | 48%| | - Posts | 63% | 59% | 49%| 67% | 53%| | Used | 39% | 34% | 14%| 47% | 23%| | - UKTI | 31% | 27% | 8% | 38% | 17%| | - Posts | 26% | 21% | 10%| 33% | 14%| As seen below, awareness and usage of UKTI also appears to be linked to firms’ growth objectives, with those firms that predict growth over the next 5 years (particularly ‘substantial’ growth) more likely to have heard of the organisation and used its services. Awareness is highest amongst innovative high-growth firms (81%), which is encouraging given that this is a key group for UKTI.

Table 7.1.7 Awareness & Use of UKTI – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non innovative | |-------------------|---------------------|---------------| | Stay same | Mod. growth | Sub. growth | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Aware | 64% | 70% | 77% | 81% | 73% | 61% | | - UKTI | 40% | 53% | 64% | 67% | 55% | 38% | | - Posts | 52% | 55% | 60% | 63% | 58% | 49% | | Used | 24% | 31% | 30% | 34% | 35% | 14% | | - UKTI | 14% | 24% | 23% | 26% | 27% | 8% | | - Posts | 17% | 19% | 19% | 21% | 21% | 10% |

Awareness and usage also tends to increase slightly amongst firms using less ‘traditional’ or more advanced internationalisation modes (i.e. not just selling direct), and is highest for those operating overseas sites and using agents or distributors.

Table 7.1.8 Awareness & Use of UKTI – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 784 | 363 | 105 | 194 | | Aware | 72% | 79% | 75% | 78% | | - UKTI | 54% | 65% | 65% | 64% | | - Posts | 57% | 62% | 55% | 62% | | Used | 29% | 37% | 32% | 41% | | - UKTI | 23% | 29% | 30% | 30% | | - Posts | 18% | 25% | 18% | 32% | Those firms that had received support from UKTI itself (rather than through an overseas post) were asked to give details of the type of assistance received. Firms that had either only received support from an overseas post and non-users of UKTI were asked whether, to the best of their knowledge, anyone in their firm had ever visited the UKTI website. These results are shown in the charts below.

Chart 7.1.1 Type of UKTI Support Used (UKTI users except those just using posts)

- Visited the UKTI website: 59%
- Received one-to-one support from an ITA: 61%
- Attended an event or overseas mission: 55%
- Received any other type of support: 43%

Base: All using UKTI exc. just using posts (Base, Don't know) (190, 3%)

Chart 7.1.2 Usage of UKTI Website (Non-users & those just using posts)

- Yes: 14%
- No: 85%

Base: All not using UKTI inc. those just using posts (Base, Don't know) (713, 1%)

As seen above, amongst UKTI users there is a fairly even split between those visiting the website, receiving one-to-one support and attending events or missions.

In addition to the 59% of UKTI users that have visited the website, a further 14% of non-users (or those just accessing support from an overseas post) have also done so. When this data is combined, it means that 24% of all internationalising firms have visited the UKTI website. 7.2 Awareness & Use of Business Link

All firms were also asked whether they had heard of Business Link and whether they had used their services. Those that had not used Business Link were also asked whether they expected to do so in the future. The table below provides a summary of awareness and usage levels. Please note that in the interests of interview length, firms that operated overseas sites were not asked any of the questions relating to Business Link.

Table 7.2.1 Awareness & Use of Business Link – By UKTI Usage

| | Total | UKTI Usage | |----------------------|-------|------------| | | | UKTI User | Non-User | | Base: All exc. overseas sites | 809 | 210 | 599 | | Aware of Business Link | 80% | 89% | 77% | | Used Business Link | 54% | 71% | 48% | | Not used but expect to| 7% | 4% | 8% |

Awareness of Business Link amongst internationalising firms stands at 80%, with just over half having used the service (54%). Only 7% of firms indicate that they have not used Business Link but expect to do so in the future. Awareness and usage levels are significantly higher amongst UKTI users, suggesting that firms who are open to external support are likely to access this from a number of different sources.

Although it is not statistically significant, there is some suggestion that larger firms are less likely to have heard of or used Business Link, and usage also appears to be slightly lower amongst firms that have been established for more than 10 years.

Table 7.2.2 Awareness & Use of Business Link – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | |---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base: All exc. overseas sites | 223 | 223 | 363 | 508 | 211 | 34 | 24 | 15 | | Aware of Business Link | 82% | 83% | 79% | 84% | 76% | 82% | 72% | 60% | | Used Business Link | 57% | 57% | 52% | 54% | 58% | 51% | 50% | 20% | | Not used but expect to| 10% | 4% | 7% | 8% | 5% | 7% | 4% | 7% |

As seen below, there are no major differences in Business Link usage by internationalisation mode, although firms that use agents or distributors do appear slightly more likely to have heard of and used the service.

Table 7.2.3 Awareness & Use of Business Link – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base: All exc. overseas sites | 709 | 319 | 74 | - | | Aware of Business Link | 81% | 85% | 78% | - | | Used Business Link | 54% | 60% | 48% | - | | Not used but expect to | 8% | 8% | 7% | - | Those firms that had used Business Link were asked to give details of how this support had been delivered. As detailed below, the most common channel was face-to-face, closely followed by website and then telephone contact.

Chart 7.2.1 Business Link Support Channels Used (Business Link Users)

- Through their website: 55%
- Over the telephone: 49%
- At a face-to-face meeting with an advisor: 59%
- Other: 6%

Base: All using Business Link (Base, Don't know) (442, 2%)

Those firms that had not used Business Link but were planning to do so in future were asked to specify their preferred method of obtaining this help or support. As set out below, half of these firms indicated that website was their preferred option, rather than direct contact through face-to-face meetings or over the telephone.

Chart 7.2.2 Preferred Channel For Business Link Support (Business Link Non-Users)

- Through their website: 51%
- Over the telephone: 16%
- At a face-to-face meeting with an advisor: 25%
- Other: 8%

Base: All not using Business Link but planning to do so (Base, Don't know) (59, 0%) 8. Drivers of Market

8.1 Drivers of Market (Summary)

For the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’
- Firms that were just considering overseas business were asked to select the country they were ‘likely to do business in first’
- Firms that operated overseas sites were asked to restrict their market choice to one of the markets where they had a site

For full details of the markets selected by users and non-users of UKTI, please refer to Annex A.

Once the market had been selected, firms were read out 3 possible reasons for deciding to focus on that market, and asked to indicate the extent to which each one applied to them (using a 5 point scale, where 5 meant it was ‘completely applicable’ and 1 meant it was ‘not at all applicable’). The possible reasons tested were as follows:

- “You had received an approach or enquiry from someone in <MARKET>”
- “There was someone within your company who already had experience of <MARKET>”
- “An existing customer that you were already doing business with requested that you start doing business in <MARKET>”

The table below shows the proportion of firms giving a score of 4 or 5 out of 5 for each of these reasons for doing business in the market in question. This analysis also includes the overall proportion influenced by ‘existing networks’ (i.e. someone in the firm with prior experience or in response to a request from an existing customer).

| Reason | Total | UKTI Usage | |---------------------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Any significant motivation | 76% | 77% | 76% | | - Received an approach | 57% | 55% | 57% | | - Staff with market experience | 26% | 27% | 25% | | - Existing customer request | 30% | 29% | 30% | | - Net: Existing networks | 45% | 46% | 45% | | No significant motivations | 24% | 23% | 24% |

The majority of firms (57%) indicated that a key motive for entering the market was reactive, in the sense that they were responding to an approach/enquiry from someone in that market. However, 45% were significantly motivated by existing networks, with similar proportions indicating that this was staff with previous market experience and requests from existing customers.

There is no difference in the market entry motivations of UKTI users and non-users. As seen below, there are also no consistent (or significant) differences by age or size of firm.

Table 8.1.2 Drivers of Market – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | |---------------------|---------------------------|-----|-------|-------|---------|------| | Up to 5 | 236 | 536 | 251 | 45 | 31 | 23 | | 6-10 | 256 | 79% | 74% | 79% | 74% | 77% | | Over 10 | 411 | 52% | 51% | 47% | 52% | 44% | | Any significant motivation | 75% | 79% | 74% | 79% | 74% | 77% | | - Received an approach | 54% | 62% | 51% | 47% | 52% | 44% | | - Staff with market experience | 31% | 28% | 22% | 33% | 21% | 18% | | - Existing customer request | 30% | 29% | 33% | 33% | 28% | 27% | | - Net: Existing networks | 46% | 45% | 47% | 55% | 39% | 36% | | No significant motivations | 25% | 21% | 26% | 27% | 23% | 42% |

There are also no apparent differences in this respect by the number of years firms have been exporting or the number of markets they operate in, and it is clear that reactive reasons (i.e. responding to an approach from a potential customer) play an important role in the market choice of all firms, irrespective of their overseas experience.

Table 8.1.3 Drivers of Market – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 198 | 415 | 287 | 441 | 174 | 279 | | Any significant motivation | 74% | 79% | 74% | 76% | 80% | 74% | | - Received an approach | 57% | 57% | 56% | 57% | 58% | 56% | | - Staff with market experience | 29% | 28% | 22% | 28% | 21% | 25% | | - Existing customer request | 28% | 31% | 29% | 30% | 32% | 28% | | - Net: Existing networks | 46% | 48% | 42% | 47% | 43% | 43% | | No significant motivations | 26% | 21% | 26% | 24% | 20% | 26% | Interestingly, non-innovative and non-IP active firms are more likely to target a market in response to a request from an existing customer. However, IP active firms are more likely to have entered the market because they have staff with previous experience of doing business there.

Table 8.1.4 Drivers of Market – By Innovation

| | Innovative | IP Active | |----------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Any significant motivation | 78% | 75% | 80% | 80% | 75% | | - Received an approach | 57% | 56% | 58% | 55% | 57% | | - Staff with market experience | 27% | 26% | 25% | 33% | 23% | | - Existing customer request | 28% | 27% | 36% | 27% | 31% | | - Net: Existing networks | 46% | 44% | 50% | 50% | 44% | | No significant motivations | 22% | 25% | 20% | 20% | 25% |

Firms that were ‘born global’ (particularly under the tighter, alternative definition) are more likely to be influenced to enter a new market by their existing networks. Young technology intensive firms, on the other hand, are comparatively more likely to be responding to an approach from someone in that market.

Table 8.1.5 Drivers of Market – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Over 5 years old | | Base | 234 | 128 | 52 | 124 | 667 | | Any significant motivation | 75% | 77% | 75% | 78% | 76% | | - Received an approach | 55% | 52% | 48% | 61% | 57% | | - Staff with market experience | 31% | 36% | 48% | 34% | 24% | | - Existing customer request | 29% | 37% | 42% | 27% | 30% | | - Net: Existing networks | 46% | 54% | 62% | 48% | 45% | | No significant motivations | 25% | 23% | 25% | 22% | 24% |

As seen below, there is little difference in the market entry motivations of firms targeting high growth, EEA or other markets.

Table 8.1.6 Drivers of Market – By Market Type

| | Market | |----------------------|--------| | | High Growth | EEA | Other | | Base | 227 | 326 | 350 | | Any significant motivation | 78% | 78% | 73% | | - Received an approach | 57% | 58% | 55% | | - Staff with market experience | 23% | 30% | 23% | | - Existing customer request | 33% | 30% | 28% | | - Net: Existing networks | 46% | 48% | 42% | | No significant motivations | 22% | 22% | 27% | As might be expected, firms where any of the senior management team were born overseas are more likely to be motivated by existing staff experience, suggesting that these links and local knowledge can influence decisions about which markets to target.

Table 8.1.7 Drivers of Market – By Overseas-Born Senior Management

| | Overseas-Born Owners, Partners or Directors | |-------------------------------|---------------------------------------------| | | Yes | No | | **Base** | 233 | 652 | | Any significant motivation | 77% | 76% | | - Received an approach | 53% | 58% | | - Staff with market experience| 39% | 21% | | - Existing customer request | 32% | 29% | | - Net: Existing networks | 54% | 42% | | No significant motivations | 23% | 24% | 8.2 Drivers of Market (Detailed)

8.2.1 Received An Approach

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms felt that they were motivated to enter the market because they received an approach by someone in the market.

Chart 8.2.1.1 You Had Received An Approach Or Enquiry From Someone In <Market>

Approaching half of all internationalising firms indicated that this reason was 'completely applicable' to them, scoring 5 on the 5-point scale, and 72% felt that it applied to at least some extent (i.e. 2-5 out of 5). 8.2.2 Staff With Experience

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms felt that they were motivated to enter the market because they already had staff with experience of the market.

Chart 8.2.2.1 There Was Someone Within Your Company Who Already Had Experience Of <Market>

Just over a third of firms (36%) felt that this reason applied to at least some extent (i.e. 2-5 out of 5), with 20% indicating that it was a ‘completely applicable’ reason for choosing to target the selected market (i.e. 5 out of 5). 8.2.3 Request From Existing Customer

The chart below shows the full distribution of ratings on the 5-point scale for the extent to which firms felt that they were motivated to enter the market because an existing customer that they were already doing business with requested that they do so.

Chart 8.2.2.1 An Existing Customer That You Were Already Doing Business With Requested That You Start Doing Business In <Market>

Around two-fifths of internationalising firms (42%) indicated that they were motivated to at least some extent (i.e. 2-5 out of 5) by an existing customer. Approaching a quarter stated that this was a ‘completely applicable’ reason (i.e. 5 out of 5). 9. Barriers to Overseas Trade

9.1 Barriers (Summary)

As mentioned previously, for the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’
- Firms that were just considering overseas business were asked to select the country they were ‘likely to do business in first’
- Firms that operated overseas sites were asked to restrict their market choice to one of the markets where they had a site

For full details of the markets selected by users and non-users of UKTI, please refer to Annex A.

Firms were then read out 11 potential barriers that they might have faced when trying to develop their business in the selected market, and asked to indicate the extent to which each one had been a difficulty (using a 5 point scale, where 5 meant it had been ‘extremely difficult’ and 1 meant it had ‘not been at all difficult’). The barriers tested were as follows:

- Dealing with legal or tax regulations or standards in < MARKET >
- Protecting your intellectual property
- Ensuring you get paid and enforcing contracts
- Dealing with customs procedures or paperwork
- Identifying who to make contact with in the first instance or finding a suitable partner
- Establishing an initial dialogue with prospective customers or business partners in < MARKET >
- Building relationships with key influencers or decision-makers
- Obtaining basic information about doing business in < MARKET >
- Finding the necessary management time to devote to doing business in < MARKET >
- Negotiating the culture and language
- A preference on the part of customers in < MARKET > for doing business with firms from < MARKET >

Please note that all analysis in this section of the report is based just on firms that were already doing business overseas (i.e. ‘considerers’ have been excluded). The table below shows the proportion of firms experiencing each barrier to a significant extent (i.e. scoring 4 or 5 out of 5 for the extent to which it was a difficulty). Details of the full distribution of scores are shown in Section 9.2.

Table 9.1.1 Individual Barriers – By UKTI Usage

| Base: All exporters | Total | UKTI Usage | Non-User | |---------------------|-------|------------|----------| | | 842 | 242 | 600 | | Dealing with legal or tax regulations and standards | 25% | 33% | 21% | | Dealing with customs procedures and paperwork | 24% | 30% | 21% | | Ensuring you get paid and enforcing contracts | 22% | 22% | 22% | | Finding the necessary management time to devote to doing business in <market> | 20% | 29% | 17% | | Identifying who to make contact with in the first instance | 20% | 30% | 16% | | Building relationships with key influencers or decision makers | 19% | 28% | 16% | | Preference on part of customers for doing business with firms from <market> | 19% | 26% | 16% | | Negotiating the language and culture | 18% | 23% | 15% | | Establishing an initial dialogue with prospective customers or partners in <market> | 17% | 24% | 15% | | Obtaining basic information about doing business in <market> | 16% | 18% | 14% | | Protecting your intellectual property | 14% | 18% | 12% |

The most widely experienced barriers all relate to the formalities and bureaucracy of doing business overseas, with 25% having significant problems with legal or tax regulations, 24% with customs procedures and 22% with getting paid.

UKTI users are consistently more likely to report each of the barriers than non-users (with the exception of ensuring payment/enforcing contracts), and it be that the experience of encountering these difficulties prompted them to contact UKTI.

However, at this stage it should be remembered that respondents were asked to talk about the ‘most challenging’ market that they had done business in, and this is likely to be contributing towards this difference between users and non-users. UKTI users tend to have been doing business overseas longer, be operating in more markets and are more likely to be doing business in high growth markets. As such, UKTI users would appear to have a higher chance of having encountered a particularly ‘challenging’ market which involves significant barriers. Generally, firms that operate overseas sites and do business through licensing, franchising or other contractual arrangements are most likely to report each of the types of barrier.

Table 9.1.2 Individual Barriers – By Modes Used In Selected Market

| Modes Used In Market | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |----------------------|----------------|---------------------|--------------------------|---------------| | Base: All exporters | 644 | 263 | 45 | 153 | | Dealing with legal or tax regulations and standards | 24% | 28% | 34% | 48% | | Dealing with customs procedures and paperwork | 25% | 26% | 31% | 41% | | Ensuring you get paid and enforcing contracts | 23% | 22% | 37% | 29% | | Finding the necessary management time to do business in <market> | 20% | 21% | 28% | 31% | | Identifying who to make contact with in the first instance | 19% | 24% | 32% | 22% | | Building relationships with key influencers or decision makers | 19% | 22% | 32% | 24% | | Customer preference for doing business with firms from <market> | 18% | 22% | 24% | 29% | | Negotiating the language and culture | 17% | 23% | 36% | 24% | | Establishing an initial dialogue with prospective customers or partners | 17% | 19% | 19% | 18% | | Obtaining basic information about doing business in <market> | 17% | 16% | 19% | 18% | | Protecting your intellectual property | 13% | 17% | 23% | 20% | The 11 individual barriers firms were prompted with have been summarised further as outlined below.

| Barriers - Summary | |--------------------| | Firms have been defined as perceiving significant ‘legal & regulatory’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Dealing with legal or tax regulations or standards in <MARKET> | | • Or, Protecting your intellectual property | | • Or, Ensuring you get paid and enforcing contracts | | Firms have been defined as perceiving significant ‘customs’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Dealing with customs procedures or paperwork | | Firms have been defined as perceiving significant ‘contacts’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Identifying who to make contact with in the first instance or finding a suitable partner | | • Or, Establishing an initial dialogue with prospective customers or business partners in <MARKET> | | • Or, Building relationships with key influencers or decision-makers | | Firms have been defined as perceiving significant ‘information’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Obtaining basic information about doing business in <market> | | Firms have been defined as perceiving significant ‘resource’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Finding the necessary management time to devote to doing business in <MARKET> | | Firms have been defined as perceiving significant ‘language & cultural’ barriers if the scored 4 or 5 on a 5-point scale for… | | • Negotiating the language & culture | | Firms have been defined as perceiving significant ‘bias’ barriers if they scored 4 or 5 on a 5-point scale for… | | • A preference on the part of customers in <MARKET> for doing business with firms from <MARKET> | The table below shows the proportions of firms scoring against each of these summary categories as well as an analysis of the number of individual barriers experienced to a significant extent.

Table 9.1.3 Summary Barriers – By UKTI Usage

| Types of Barriers | Total | UKTI Usage | |-----------------------------------|-------|------------| | | | UKTI User | Non-User | | Base: All exporters | 842 | 242 | 600 | | Legal & regulatory barriers | 43% | 51% | 40% | | Customs barriers | 24% | 30% | 21% | | Contacts barriers | 33% | 46% | 27% | | Information barriers | 16% | 18% | 14% | | Resource barriers | 20% | 29% | 17% | | Language & cultural barriers | 18% | 23% | 15% | | Bias barriers | 19% | 26% | 16% |

| Number of Barriers | | UKTI User | Non-User | |----------------------------------|-------|-----------|----------| | At least one significant individual barrier | 67% | 83% | 61% | | - One | 17% | 19% | 16% | | - Two | 13% | 13% | 12% | | - Three | 12% | 16% | 11% | | - Four or more | 25% | 35% | 21% | | No significant barriers | 33% | 17% | 39% |

As has been the case in past UKTI studies, legal and regulatory barriers and contacts barriers are highlighted as being the most important, experienced by 43% and 33% of firms respectively in their selected market.

Overall, two-thirds of firms report experiencing at least one significant barrier in their selected market (which, it should be noted, is the ‘most challenging market’ they have done business in). A quarter of firms have encountered significant difficulties with four or more of the individual barriers, suggesting there is a clear need for some form of external assistance to help firms overcome these barriers and successfully trade in overseas markets.

UKTI users clearly come across more significant barriers than non-users, with 83% experiencing at least one, compared to just 61% of non-users. Users are more likely to encounter each of the barrier types (although please note that this difference is not statistically significant for ‘information barriers’). Older firms are slightly less likely to have experienced any significant barriers when doing business overseas. There are no consistent differences by size of firm in this respect, but smaller firms are slightly more likely to experience information barriers.

Table 9.1.4 Summary Barriers – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base: All exporters | |---------------------|-----------------------------|---------------------| | Up to 5 | 204 | 241 | | 6-10 | 241 | 397 | | Over 10 | 491 | 238 | | 0-9 | 238 | 45 | | 10-49 | 45 | 31 | | 50-99 | 31 | 23 | | 100-249 | | | | 250+ | | |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | Up to 5 | 42% | 22% | 27% | 15% | 23% | 13% | 17% | | 6-10 | 40% | 24% | 32% | 14% | 20% | 14% | 18% | | Over 10 | 45% | 24% | 34% | 16% | 20% | 20% | 20% | | 0-9 | 42% | 21% | 32% | 17% | 20% | 16% | 17% | | 10-49 | 46% | 26% | 37% | 15% | 18% | 18% | 20% | | 50-99 | 41% | 26% | 28% | 10% | 22% | 28% | 23% | | 100-249 | 36% | 31% | 23% | 12% | 23% | 28% | 27% | | 250+ | 56% | 42% | 27% | 13% | 38% | 38% | 38% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | Up to 5 | 65% | 18% | 15% | 13% | 19% | 35% | | 6-10 | 61% | 15% | 9% | 11% | 25% | 39% | | Over 10 | 70% | 18% | 13% | 14% | 27% | 30% | | 0-9 | 65% | 16% | 12% | 14% | 22% | 35% | | 10-49 | 69% | 16% | 13% | 11% | 29% | 31% | | 50-99 | 70% | 16% | 4% | 13% | 31% | 30% | | 100-249 | 68% | 20% | 16% | 7% | 25% | 32% | | 250+ | 82% | 22% | 13% | 9% | 38% | 18% |

There is no evidence that barriers decline as firms become more experienced overseas, and in fact it appears that they actually increase (although this is likely to be partly a function of the fact that firms focussed on their ‘most challenging’ market, and experienced firms have done business in more markets).

Table 9.1.5 Summary Barriers – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base: All exporters | 137 | 415 | 287 | 380 | 174 | 279 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | Less than 2 years | 38% | 23% | 23% | 11% | 23% | 12% | 10% | | 2-10 years | 39% | 22% | 32% | 15% | 22% | 15% | 19% | | Over 10 years | 48% | 25% | 36% | 18% | 18% | 22% | 21% | | Up to 5 | 37% | 14% | 25% | 13% | 18% | 13% | 16% | | 6-10 | 47% | 33% | 37% | 17% | 24% | 17% | 23% | | More than 10 | 49% | 31% | 40% | 19% | 22% | 25% | 20% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | Less than 2 years | 59% | 14% | 16% | 12% | 17% | 65% | | 2-10 years | 65% | 17% | 14% | 12% | 22% | 71% | | Over 10 years | 71% | 18% | 10% | 13% | 30% | 71% | | Up to 5 | 60% | 19% | 13% | 11% | 17% | 60% | | 6-10 | 72% | 15% | 13% | 19% | 25% | 72% | | More than 10 | 74% | 16% | 12% | 11% | 35% | 74% | As seen below, firms that are active in only one overseas region are significantly less likely to have experienced any barriers. There is some evidence that the likelihood if experiencing customs, contacts and language & cultural barriers increases as firms become active in more regions.

Table 9.1.6 Summary Barriers – By Number of Regions

| Number of Overseas Regions Active In | One | Two | Three | Four | Five | |--------------------------------------|-----|-----|-------|------|------| | Base: All exporters | 224 | 168 | 164 | 126 | 157 |

Types of Barriers

| Types of Barriers | One | Two | Three | Four | Five | |-------------------|-----|-----|-------|------|------| | Legal & regulatory| 38% | 41% | 44% | 54% | 42% | | Customs | 15% | 18% | 28% | 32% | 29% | | Contacts | 23% | 33% | 34% | 37% | 39% | | Information | 14% | 15% | 17% | 17% | 17% | | Resource | 15% | 27% | 22% | 22% | 17% | | Language & cultural| 15% | 11% | 20% | 19% | 24% | | Bias | 16% | 22% | 20% | 17% | 20% |

Number of Barriers

| Number of Barriers | One | Two | Three | Four | Five | |--------------------|-----|-----|-------|------|------| | At least one barrier| 58% | 69% | 70% | 72% | 70% | | - One | 20% | 19% | 16% | 15% | 16% | | - Two | 11% | 14% | 14% | 13% | 11% | | - Three | 9% | 14% | 16% | 12% | 11% | | - Four or more | 18% | 22% | 24% | 32% | 32% | | No significant barriers | 42% | 31% | 30% | 28% | 30% |

Interestingly, innovative and IP active firms report more barriers to overseas trade. This difference is true of all the barrier types except information barriers.

Table 9.1.7 Summary Barriers – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base: All exporters | 393 | 608 | 234 | 196 | 633 |

Types of Barriers

| Types of Barriers | Yes | No | Yes | No | |-------------------|-----|----|-----|----| | Legal & regulatory| 48% | 37%| 53% | 40%| | Customs | 28% | 18%| 29% | 22%| | Contacts | 37% | 25%| 40% | 31%| | Information | 17% | 16%| 18% | 15%| | Resource | 25% | 13%| 28% | 18%| | Language & cultural| 20% | 15%| 22% | 16%| | Bias | 21% | 15%| 21% | 19%|

Number of Barriers

| Number of Barriers | Yes | No | Yes | No | |--------------------|-----|----|-----|----| | At least one barrier| 72% | 57%| 76% | 64%| | - One | 17% | 18%| 17% | 17%| | - Two | 11% | 11%| 11% | 13%| | - Three | 12% | 10%| 9% | 14%| | - Four or more | 32% | 19%| 40% | 21%| | No significant barriers | 28% | 43%| 24% | 36%| Interestingly, firms with substantial growth aspirations are more likely to encounter significant barriers, suggesting that they are most in need of external assistance.

Table 9.1.8 Summary Barriers – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non innovative | |-------------------|---------------------|---------------| | Stay same | Mod. growth | Sub. growth | | Base: All exporters | 99 | 441 | 256 | | | 218 | 390 | 234 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | | 38% | 18% | 23% | 12% | 9% | 16% | 9% | | | 43% | 23% | 31% | 14% | 20% | 19% | 20% | | | 50% | 30% | 41% | 20% | 27% | 18% | 22% | | | 53% | 32% | 42% | 19% | 27% | 19% | 22% | | | 42% | 23% | 33% | 14% | 21% | 18% | 19% | | | 37% | 18% | 25% | 16% | 13% | 15% | 15% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 53% | 14% | 12% | 11% | 16% | 47% | | | 68% | 20% | 11% | 12% | 25% | 32% | | | 75% | 13% | 16% | 14% | 33% | 25% | | | 77% | 13% | 14% | 16% | 33% | 23% | | | 68% | 19% | 13% | 12% | 25% | 19% | | | 57% | 18% | 11% | 10% | 19% | 43% |

As seen below, firms demonstrating growth via the ASBS definitions (and particularly ‘sustained’ growth), and those classified as ‘high growth’ or ‘gazelles’ by the OECD definitions, are more likely to have experienced barriers to their overseas development.

Table 9.1.9 Summary Barriers Modes Of Internationalisation – By Growth

| ASBS Definition | OECD Definition | |-----------------|-----------------| | Sustained | Contained | New | No growth | High growth | Gazelles | | Base: All exporters | 114 | 124 | 142 | 462 | 104 | 34 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | | 47% | 30% | 42% | 23% | 27% | 16% | 24% | | | 40% | 24% | 42% | 15% | 18% | 24% | 24% | | | 53% | 31% | 39% | 18% | 27% | 20% | 20% | | | 40% | 20% | 26% | 14% | 18% | 16% | 16% | | | 54% | 22% | 48% | 22% | 28% | 21% | 27% | | | 50% | 15% | 35% | 18% | 24% | 6% | 21% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 79% | 16% | 16% | 16% | 30% | 21% | | | 73% | 22% | 8% | 15% | 27% | 27% | | | 72% | 10% | 15% | 13% | 35% | 28% | | | 62% | 18% | 12% | 11% | 21% | 38% | | | 81% | 15% | 15% | 17% | 34% | 19% | | | 79% | 21% | 21% | 24% | 15% | 21% | Young firms that are defined as being ‘born global’ under the alternative, tighter definition are more likely to experience barriers than other firms.

Table 9.1.10 Summary Barriers – By Born Global & Young, Tech Intensive

| Types of Barriers | Up to 5 years old | Over 5 years old | |----------------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | | Base: All exporters | 202 | 128 | 52 | 110 | 638 | | Legal & regulatory | 42% | 43% | 50% | 49% | 43% | | Customs | 21% | 22% | 21% | 25% | 24% | | Contacts | 28% | 31% | 40% | 30% | 34% | | Information | 15% | 13% | 13% | 17% | 16% | | Resource | 23% | 22% | 25% | 26% | 20% | | Language & cultural | 13% | 15% | 17% | 16% | 18% | | Bias | 16% | 18% | 23% | 22% | 19% |

Number of Barriers

| At least one barrier | 65% | 67% | 73% | 68% | 68% | | - One | 18% | 22% | 23% | 15% | 17% | | - Two | 15% | 11% | 10% | 15% | 12% | | - Three | 13% | 14% | 13% | 15% | 12% | | - Four or more | 18% | 20% | 27% | 24% | 26% | | No significant barriers | 35% | 33% | 27% | 32% | 32% | It is also apparent that firms that sell directly to overseas customers are less likely to come across significant barriers than those adopting alternative modes. Generally, those using contractual arrangements and operating overseas sites are most likely to report each of the types of barrier.

Table 9.1.11 Summary Barriers – By Modes Used In Selected Market

| Modes Used In Market | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |----------------------|----------------|---------------------|--------------------------|---------------| | Base: All exporters | 644 | 263 | 45 | 153 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------------|--------------------|---------|----------|-------------|----------|---------------------|------| | | 44% | 25% | 32% | 17% | 20% | 17% | 18% | | | 45% | 26% | 37% | 16% | 21% | 23% | 22% | | | 50% | 31% | 48% | 19% | 28% | 36% | 24% | | | 59% | 41% | 35% | 18% | 31% | 24% | 29% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 67% | 18% | 13% | 13% | 24% | 33% | | | 70% | 12% | 12% | 14% | 32% | 30% | | | 80% | 17% | 3% | 15% | 45% | 20% | | | 78% | 12% | 10% | 14% | 41% | 22% |

There is clear evidence that high growth and ‘other’ markets involve more significant barriers than those in the European Economic Area, and this is true for all types of barrier except resource barriers and bias barriers. However, approaching two-thirds of firms that were focussing on EEA market still experienced significant barriers.

Table 9.1.12 Summary Barriers – By Market Type

| Market | High Growth | EEA | Other | |-----------------|-------------|-----|-------| | Base: All exporters | 212 | 296 | 334 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------------|--------------------|---------|----------|-------------|----------|---------------------|------| | | 51% | 33% | 40% | 15% | 21% | 25% | 17% | | | 36% | 14% | 26% | 13% | 19% | 17% | 20% | | | 45% | 27% | 34% | 18% | 21% | 13% | 18% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 72% | 14% | 11% | 14% | 33% | 28% | | | 61% | 18% | 12% | 11% | 20% | 39% | | | 69% | 18% | 14% | 12% | 25% | 31% | The table below provides further analysis of the barriers experienced by firms’ motivations for trying to enter that particular market. Please note that the motivation categories are based on those scoring 4-5 out of 5 for each one (i.e. indicating that it was a significant motivation).

Table 9.1.13 Summary Barriers – By Market Entry Motivations

| Significant Motivations | Received approach | Staff with experience | Existing customer request | Net: Existing networks | No sig. motivations | |-------------------------|-------------------|-----------------------|---------------------------|-----------------------|---------------------| | Base: All exporters | 488 | 224 | 259 | 390 | 187 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|---------------------|------| | | 44% | 25% | 30% | 16% | 18% | 17% | 17% |

Number of Barriers

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|---------|----------------|-------------------------| | | 67% | 19% | 13% | 10% | 25% | 33% |

Interestingly, there is no evidence that firms that enter a particular market due to having existing networks in place (i.e. staff experience or in response to a request from an existing customer) are any less likely to experience barriers when doing so. Overall 68% of this group experienced at least one significant barrier, a similar level to that seen for those who received an approach or enquiry from someone in the market and for those that did not indicate any significant market entry motivations.

Even when looking at the individual types of barrier, there are no clear or consistent differences by market entry motivations. The table below provides comparative analysis of the barriers experienced between firms that have overseas-born members of the senior management team and those that do not. While it might be expected that this would help avoid potential barriers due to better knowledge of the language or culture, local connections, etc there is no evidence that this is the case and in fact firms with overseas-born members of the management team appear to experience more barriers. However, it should be noted that for these questions firms were asked to focus on their ‘most challenging’ overseas market, so it is very possible that the markets where members of the senior management team were born were not identified as the most challenging one.

Table 9.1.14 Summary Barriers – By Overseas-Born Senior Management

| Types of Barriers | Overseas-born owners, partners or directors | | |----------------------------|---------------------------------------------|---| | | Yes | No | | Base: All exporters | 214 | 610| | Legal & regulatory | 50% | 41%| | Customs | 27% | 22%| | Contacts | 38% | 31%| | Information | 17% | 15%| | Resource | 22% | 20%| | Language & cultural | 23% | 15%| | Bias | 27% | 16%|

| Number of Barriers | | |----------------------------|---| | At least one barrier | 74% | 65% | | - One | 17% | 17% | | - Two | 11% | 13% | | - Three | 14% | 12% | | - Four or more | 32% | 23% | | No significant barriers | 26% | 35% |

As detailed earlier in this report (Section 6.6.7), firms with overseas-born members of their ownership/management team tend to have been exporting for longer, are more inclined to do business through contractual arrangements and via their own overseas sites, are more likely to be IP active and have more ambitious growth objectives. All of these characteristics are associated with a greater likelihood of experiencing barriers, which may explain the differences between this group and those without any overseas-born senior management. The table below provides analysis of the barriers experienced by individual market. Please note that it has only been possible to provide this analysis for markets selected by at least 30 respondents.

Table 9.1.15 Summary Barriers – By Individual Market

| Market | China | France | Germany | India | Ireland | UAE | USA | |-----------------|-------|--------|---------|-------|---------|-----|-----| | Base: All exporters | 46 | 61 | 48 | 43 | 32 | 34 | 132 |

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|---------------------|------| | | 51% | 40% | 47% | 21% | 26% | 40% | 22% | | | 34% | 14% | 33% | 10% | 22% | 26% | 34% | | | 18% | 9% | 16% | 11% | 21% | 21% | 23% | | | 65% | 33% | 41% | 9% | 20% | 20% | 16% | | | 51% | 7% | 23% | 12% | 11% | 2% | 21% | | | 34% | 16% | 11% | 14% | 18% | 4% | 4% | | | 41% | 22% | 16% | 13% | 24% | | |

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|----------|----------------|-------------------------| | | 75% | 6% | 8% | 12% | 49% | 25% | | | 57% | 7% | 7% | 15% | 29% | 43% | | | 59% | 19% | 19% | 7% | 13% | 41% | | | 79% | 22% | 7% | 20% | 30% | 21% | | | 66% | 40% | 5% | 12% | 9% | 34% | | | 63% | 13% | 16% | 4% | 30% | 37% | | | 67% | 22% | 10% | 16% | 20% | 33% |

Based on the above analysis, there are significant variations in the type and extent of barriers experienced in different markets. China and India appear to be the most challenging markets, with at least three-quarters of the firms selecting these markets reporting at least one significant barrier.

With the exception of bias barriers, the proportion of firms experiencing each barrier was significantly higher than the norm in China. In particular, customs barriers, contacts barriers and language/cultural barriers are particularly prevalent in this market.

Legal and regulatory issues are a very significant issue in India, with 65% reporting a significant difficulty in this respect (compared to 43% across all markets). It is also clear that initiating and building relationships can also be a major problem in India, with 41% reporting significant difficulties with contacts barriers. Similarly, contacts barriers are also widespread amongst firms trying to do business in the UAE.

Interestingly, bias barriers (i.e. where firms in an overseas market demonstrate a preference for doing business with other firms from their own market) seem to be a particularly large problem in France, and this is consistent with the 2010 survey results. As seen below, in every type of market UKTI users are still more likely to report significant barriers than non-users. This suggests that there is a ‘true’ distinction between users and non-users and the increased likelihood of users reporting barriers is not just because they are more likely to be in challenging high growth markets.

Table 9.1.16 Summary Barriers – By Market Type & UKTI Usage

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | Base: All exporters | 76 | 136 | 63 | 233 | 103 | 231 | | Legal & regulatory | 63% | 44% | 33% | 36% | 53% | 41% | | Customs | 42% | 27% | 14% | 14% | 32% | 24% | | Contacts | 50% | 35% | 39% | 22% | 48% | 27% | | Information | 11% | 17% | 16% | 12% | 26% | 15% | | Resource | 27% | 18% | 39% | 13% | 24% | 19% | | Language & cultural | 25% | 26% | 27% | 15% | 19% | 10% | | Bias | 19% | 17% | 29% | 18% | 29% | 13% |

Number of Barriers

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | At least one barrier | 86% | 64% | 77% | 57% | 84% | 62% | | - One | 16% | 13% | 26% | 16% | 17% | 19% | | - Two | 15% | 9% | 9% | 13% | 15% | 13% | | - Three | 19% | 11% | 10% | 12% | 16% | 10% | | - Four or more | 36% | 31% | 32% | 16% | 35% | 20% | | No significant barriers | 14% | 36% | 23% | 43% | 16% | 38% |

Similarly, when the analysis compares users and non-users that are active in similar numbers of markets, there is still clear evidence that UKTI users are more likely to report significant barriers.

Table 9.1.17 Summary Barriers – By Number of Markets & UKTI Usage

| Types of Barriers | Up to 5 markets | 6-10 markets | More than 10 markets | |-------------------|-----------------|--------------|----------------------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | Base: All exporters | 75 | 305 | 56 | 118 | 109 | 170 | | Legal & regulatory | 38% | 36% | 57% | 42% | 55% | 45% | | Customs | 17% | 13% | 38% | 30% | 34% | 28% | | Contacts | 38% | 22% | 55% | 28% | 48% | 34% | | Information | 17% | 12% | 21% | 14% | 17% | 19% | | Resource | 37% | 13% | 32% | 19% | 21% | 22% | | Language & cultural | 16% | 12% | 24% | 13% | 26% | 24% | | Bias | 23% | 14% | 35% | 16% | 23% | 18% |

Number of Barriers

| Number of Barriers | Up to 5 markets | 6-10 markets | More than 10 markets | |--------------------|-----------------|--------------|----------------------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | At least one barrier | 77% | 56% | 88% | 64% | 84% | 68% | | - One | 24% | 18% | 17% | 15% | 18% | 15% | | - Two | 15% | 12% | 10% | 14% | 13% | 11% | | - Three | 12% | 10% | 19% | 19% | 16% | 8% | | - Four or more | 26% | 15% | 42% | 17% | 36% | 34% | | No significant barriers | 23% | 44% | 12% | 36% | 16% | 32% | The tables below show analysis of barriers within each of the 3 market types by age (in the first table) and overseas experience (in the second table). Whilst the differences are generally not statistically significant, it does appear that firms established over 10 years and those exporting for over 10 years are more likely to experience barriers in high growth and ‘other’ markets.

Table 9.1.18 Summary Barriers – By Market Type & Age

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | Up to 5 yrs old | 6-10 yrs old | Over 10 yrs old | Up to 5 yrs old | 6-10 yrs old | Over 10 yrs old | Up to 5 yrs old | 6-10 yrs old | Over 10 yrs old | | Base: All exporters | 53 | 58 | 101 | 74 | 78 | 144 | 77 | 105 | 152 |

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | At least one barrier | 70% | 69% | 74% | 62% | 55% | 63% | 64% | 60% | 74% | | - One | 13% | 10% | 16% | 22% | 18% | 17% | 18% | 16% | 19% | | - Two | 13% | 9% | 12% | 11% | 12% | 13% | 19% | 8% | 15% | | - Three | 23% | 10% | 13% | 9% | 15% | 10% | 10% | 9% | 14% | | - Four or more | 21% | 40% | 34% | 20% | 10% | 23% | 16% | 28% | 26% | | No significant barriers | 30% | 31% | 26% | 38% | 45% | 37% | 36% | 40% | 26% |

Table 9.1.19 Summary Barriers – By Market Type & Experience

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | Exp. up to 2 yrs | Exp. 2-10 yrs | Exp. over 10 yrs | Exp. up to 2 yrs | Exp. 2-10 yrs | Exp. over 10 yrs | Exp. up to 2 yrs | Exp. 2-10 yrs | Exp. over 10 yrs | | Base: All exporters | 33 | 101 | 78 | 57 | 145 | 93 | 47 | 169 | 116 |

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | At least one barrier | 61% | 72% | 76% | 54% | 61% | 63% | 65% | 64% | 75% | | - One | 13% | 12% | 17% | 12% | 20% | 17% | 19% | 18% | 19% | | - Two | 13% | 12% | 10% | 14% | 16% | 8% | 21% | 13% | 13% | | - Three | 18% | 17% | 10% | 6% | 11% | 14% | 15% | 10% | 15% | | - Four or more | 18% | 31% | 38% | 22% | 15% | 25% | 11% | 25% | 28% | | No significant barriers | 39% | 28% | 24% | 46% | 39% | 37% | 35% | 36% | 25% | When interpreting the data below, the extremely low base sizes for firms with 250+ employees should be taken into account. There are no consistent differences by size of firm within each market type, although small firms (0-9 employees) are less likely to have experienced barriers in ‘other’ markets.

Table 9.1.20 Summary Barriers – By Market Type & Size

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | 0-9 | 10-249 | 250+ | SME total | 0-9 | 10-249 | 250+ | SME total | 0-9 | 10-249 | 250+ | SME total | | Base: All exporters | 112 | 91 | 7 | 203 | 179 | 107 | 6 | 286 | 200 | 116 | 10 | 316 |

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|-------------------|---------|----------|-------------|----------|---------------------|------| | | 49% | 51% | 71% | 50% | 39% | 34% | 9% | 37% | 41% | 50% | 70% | 44% | | | 28% | 37% | 43% | 32% | 14% | 15% | 9% | 14% | 23% | 29% | 60% | 26% | | | 41% | 40% | 43% | 40% | 25% | 28% | 18% | 26% | 34% | 36% | 20% | 35% | | | 17% | 14% | 14% | 15% | 15% | 12% | 0% | 14% | 20% | 16% | 20% | 18% | | | 23% | 18% | 29% | 21% | 20% | 16% | 27% | 19% | 17% | 23% | 50% | 20% | | | 27% | 24% | 29% | 25% | 14% | 22% | 27% | 17% | 11% | 16% | 10% | 13% | | | 19% | 14% | 29% | 17% | 18% | 24% | 18% | 20% | 15% | 24% | 20% | 18% |

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No sig. barriers | |--------------------|----------------------|-------|-------|----------|----------------|-----------------| | | 74% | 69% | 86% | 72% | 61% | 62% | 45% | 62% | 63% | 75% | 100% | 68% | | | 15% | 13% | 14% | 14% | 18% | 19% | 18% | 18% | 16% | 20% | 30% | 18% | | | 12% | 10% | 14% | 11% | 15% | 8% | 0% | 12% | 11% | 17% | 20% | 13% | | | 17% | 12% | 0% | 15% | 12% | 11% | 0% | 12% | 14% | 10% | 20% | 12% | | | 30% | 34% | 57% | 32% | 17% | 25% | 27% | 20% | 23% | 28% | 30% | 25% | | | 26% | 31% | 14% | 28% | 39% | 38% | 55% | 38% | 37% | 25% | 0% | 32% |

At the total level, there are no significant differences between production and service sector firms, either in the proportion experiencing any significant barriers or by the types of barriers encountered.

Table 9.1.21 Summary Barriers – By Market Type & Sector

| Types of Barriers | Total | High Growth | EEA | Other | |-------------------|-------|-------------|-----|-------| | | Prod. | Serv. | Prod. | Serv. | Prod. | Serv. | Prod. | Serv. | | Base: All exporters | 277 | 553 | 75 | 134 | 90 | 199 | 112 | 220 |

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|-------------------|---------|----------|-------------|----------|---------------------|------| | | 43% | 44% | 53% | 49% | 28% | 41% | 47% | 43% | | | 27% | 22% | 41% | 28% | 15% | 14% | 28% | 26% | | | 34% | 32% | 31% | 46% | 32% | 24% | 36% | 32% | | | 17% | 16% | 11% | 18% | 17% | 12% | 20% | 18% | | | 18% | 22% | 13% | 25% | 16% | 21% | 23% | 20% | | | 19% | 17% | 23% | 27% | 21% | 15% | 15% | 11% | | | 20% | 18% | 13% | 21% | 32% | 15% | 16% | 19% |

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|----------|----------------|-------------------------| | | 70% | 66% | 74% | 71% | 63% | 62% | 73% | 66% | | | 20% | 16% | 19% | 10% | 19% | 18% | 20% | 17% | | | 12% | 13% | 14% | 9% | 7% | 14% | 14% | 13% | | | 12% | 13% | 9% | 17% | 13% | 11% | 13% | 12% | | | 27% | 25% | 31% | 34% | 24% | 19% | 26% | 24% | | | 30% | 34% | 26% | 29% | 37% | 38% | 27% | 34% | 9.2 Barriers (Detailed)

9.2.1 Dealing With Legal Or Tax Regulations & Standards (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.1.1 Dealing With Legal Or Tax Regulations & Standards

Dealing with legal or tax regulations and standards is one of the most widespread barriers, with a quarter of firms (25%) experiencing it to a significant extent (i.e. 4 or 5 out of 5). Half of all internationalising firms (52%) reported at least some difficulties in this respect (i.e. 2-5 out of 5), with this significantly more likely to be the case amongst UKTI users. As seen below, firms that operated their own site in the market in question were by some distance the most likely to encounter problems with legal or tax regulations or standards.

Table 9.2.1 Individual Barriers – By Modes Used In Selected Market

| Modes Used In Market | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |----------------------|----------------|---------------------|--------------------------|---------------| | Base: All exporters | 644 | 263 | 45 | 153 | | 5 – Extremely difficult | 13% | 14% | 9% | 24% | | 4 | 11% | 14% | 25% | 24% | | 3 | 15% | 14% | 16% | 14% | | 2 | 14% | 10% | 15% | 11% | | 1 – Not at all difficult | 45% | 44% | 32% | 23% | | Don’t know | 2% | 3% | 3% | 3% |

As seen above, 63% of firms with overseas sites had experienced at least moderate difficulties with legal or tax regulations or standards (i.e. 3-5 out of 5). In order to investigate this issue further, these firms were asked to give more details of the specific problems they had encountered, with the following results.

Chart 9.2.1.2 Specific Problems Experienced With Legal Or Tax Regulations & Standards (Overseas Sites Only)

- Setting up and registering a company in the market: 27%
- Obtaining planning permission or other permits relating to your site in the market: 13%
- Obtaining work permits or visas for your staff to relocate to the market: 10%
- Other legal or tax issues: 23%
- No problems with legal/tax regulations (1-2 out of 5): 37%

Base: All with site in market (Base, Don’t know) (153, 14%)

The most widespread issue encountered by firms with overseas sites relates to actually setting up and registering the company in an overseas market, with over a quarter of these firms indicating that this had been a barrier. Around 1 in 10 had experienced problems with planning permission or other permits and with obtaining visas or work permits. 9.2.2 Protecting Your Intellectual Property (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.2 Protecting Your Intellectual Property

Only 14% of firms reported a significant problem with protecting their intellectual property, meaning that it was the least widespread of the barriers tested. However, it is clearly still an issue to at least some degree for a large number of firms, with 39% indicating that they had experienced at least some difficulties in this respect (i.e. 2-5 out of 5). As seen below, firms that hold some form of IP protection are significantly more likely to highlight difficulties protecting their IP overseas, and this of course may have prompted them to obtain the IP protection.

Table 9.2.2 Protecting Your Intellectual Property – By IP Activity

| IP Active | Yes | No | |-----------|-----|----| | Base: All exporters | 196 | 633 | | 5 – Extremely difficult | 15% | 6% | | 4 | 9% | 5% | | 3 | 12% | 14% | | 2 | 15% | 11% | | 1 – Not at all difficult | 44% | 63% | | Don’t know | 4% | 2% |

However, it is interesting to note that around a third of those with no IP protection report some degree of difficulty in protecting their IP (i.e. give a score of 2-5 out of 5). Whilst this may suggest that these firms would benefit from adopting some form of IP protection, it could be that they have decided against doing this for reasons of costs, concerns about its effectiveness, etc. This hypothesis is consistent with the findings from recent UKTI qualitative research(^9), which found that the cost can often dissuade firms from obtaining IP protection (both in terms of the cost of obtaining it and the cost involved in enforcing it if there is an infringement).

(^9) An Investigation Into The Practices Of SMEs In Relation To Their IPP Practices, OMB Research, September 2010 9.2.3 Ensuring You Get Paid & Enforcing Contracts (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.3 Ensuring You Get Paid & Enforcing Contracts

Half of all internationalising firms (52%) reported at least some difficulty with getting paid and enforcing contracts, with 22% indicating it had been a significant difficulty (i.e. 4-5 out of 5). As with all the barriers, UKTI users were more likely to encounter this issue, although the proportion experiencing significant difficulties is similar for users and non-users. 9.2.4 Dealing With Customs Procedures & Paperwork (Customs Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.4 Dealing With Customs Procedures & Paperwork

Around a quarter of internationalising firms (24%) have experienced significant difficulties with customs procedures, making it one of the most widely reported of the barriers tested. Furthermore, 54% of firms have had at least some problems in this respect (i.e. score 2-5 out of 5), with this proportion increasing to 66% amongst UKTI users. 9.2.5 Identifying Who To Make Contact With In The First Instance (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.5 Identifying Who To Make Contact With In The First Instance

Just under half of all firms (48%) have experienced some level of difficulty with identifying initial contacts in their selected market, with a fifth (20%) judging this to have been a significant barrier (i.e. scoring 4-5 out of 5). The majority of UKTI users (62%) have experienced at least some problems with this issue, which is consistent with other survey data that shows that a need to access suitable contacts is one of the major reasons for using UKTI support. 9.2.6 Establishing An Initial Dialogue With Prospective Customers Or Partners (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.6 Establishing An Initial Dialogue With Prospective Customers Or Partners

Over half of firms (53%) have experienced some level of difficulty with establishing an initial dialogue with prospective customers or partners in the market in question, although only 17% indicated that this had been a significant problem (i.e. 4-5 out of 5). Once again, this was more likely to be an issue for UKTI users. 9.2.7 Building Relationships With Key Influencers Or Decision Makers (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.7 Building Relationships With Key Influencers Or Decision Makers

Approaching a fifth of firms (19%) reported significant difficulties building relationships with key influencers of decision makers in an overseas market, with this rising to 28% amongst UKTI users. Overall, the majority of internationalising firms (55%) indicated that they had experienced at least some problems in this respect (i.e. 2-5 out of 5). 9.2.8 Obtaining Basic Information About Doing Business In The Market (Information Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.8 Obtaining Basic Information About Doing Business In The Market

Although only 16% of firms indicated that obtaining basic information about an overseas market had been a significant problem (i.e. 4-5 out of 5), making this one of the least prevalent of the barriers tested, it should be noted that over half (53%) reported that they had experienced at least some difficulty in this respect. This highlights the need for an organisation such as UKTI to help fill these knowledge gaps, and the fact that UKTI users are more likely to report this barrier suggests that this is a major reason for firms to approach UKTI. 9.2.9 Finding The Necessary Management Time To Devote To Doing Business In The Market (Resource Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.9 Finding The Necessary Management Time To Devote To Doing Business In The Market

Lack of time and resources is clearly a hindrance to the development of overseas business for many firms, with 59% indicating that they have had some difficulties in this respect (and 20% claiming that it has been a significant problem in their selected market).

As seen in Section 9.1, this issue is not just confined to smaller firms and in fact a slightly higher proportion of larger firms (100+ employees) experience significant problems in this respect. Once again, users of UKTI are more likely to report this barrier, emphasising the importance of UKTI’s role in helping firms target their often limited resources most effectively. 9.2.10 Negotiating The Language & Culture (Language & Cultural Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.10 Negotiating The Language & Culture

Overall, 18% of all internationalising firms have experienced significant problems with the language or cultural differences in their chosen market, with almost half (47%) reporting at least some difficulty in this regard (i.e. 2-5 out of 5). Again, this barrier is more likely to have been experienced by UKTI users. 9.2.11 A Preference On The Part Of Customers In The Market For Doing Business With Other Firms From That Market (Bias Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 9.2.11 A Preference On The Part Of Customers In The Market For Doing Business With Other Firms From That Market

Around half (49%) of firms claim to have encountered bias issues to at least some extent (i.e. score 2-5 out of 5), with 19% indicating that it has been a significant barrier. As with all the barriers, UKTI users are more likely to have been affected in this way. 9.3 The Role Of Overseas Sites In Avoiding Barriers

It was hypothesised that having a site in an overseas market might reduce the likelihood of firms encountering certain barriers to doing business there. This was investigated for the following individual barriers:

- Dealing with legal or tax regulations or standards in < MARKET >
- Protecting your intellectual property
- Ensuring you get paid and enforcing contracts
- Building relationships with key influencers or decision-makers
- Negotiating the culture and language
- A preference on the part of customers in < MARKET > for doing business with firms from < MARKET >

Those firms that had an overseas site and had experienced no or only very minimal problems with the above barriers (i.e. scored 1-2 out of 5 for the extent to which they had been a difficulty), were asked whether having a site had helped them avoid these issues. The table below summarises these results.

Table 9.3.1 Extent That Having A Site In The Market Has Helped Avoid Barriers (Overseas Sites Only)

| Barrier | Dealing with legal or tax regulations and standards | Protecting your intellectual property | Ensuring you get paid and enforcing contracts | |------------------------------------------------------------------------|----------------------------------------------------|---------------------------------------|---------------------------------------------| | Base: All with site in market | 153 | 153 | 153 | | Yes, having a site in market has helped avoid problems with this | 21% | 27% | 27% | | No, having a site in market has not helped avoid problems with this | 10% | 35% | 18% | | Have experienced problems with this issue (3-5 out of 5) | 63% | 32% | 46% | | Don’t know | 6% | 6% | 8% |

| Barrier | Building relationships with key influencers or decision makers | Negotiating the language and culture | Customer preference for doing business with firms from own market | |------------------------------------------------------------------------|---------------------------------------------------------------|-------------------------------------|---------------------------------------------------------------| | Base: All with site in market | 153 | 153 | 153 | | Yes, having a site in market has helped avoid problems with this | 40% | 41% | 31% | | No, having a site in market has not helped avoid problems with this | 11% | 16% | 14% | | Have experienced problems with this issue (3-5 out of 5) | 44% | 39% | 44% | | Don’t know | 5% | 4% | 10% |

It appears that having a site in an overseas market can significantly reduce the risk of encountering difficulties with building relationships with overseas contacts and of experiencing problems with the language or culture. Two-fifths of firms felt that having a site had helped avoid problems with these issues. However, overseas sites are less effective at preventing difficulties with legal or tax regulations and standards, with only 21% of firms with a site claiming that this had helped avoid these sorts of issues.

This is consistent with the survey data on the specific types of legal and regulatory issues experienced by firms with overseas sites. The most widespread difficulty related to setting up and registering the company overseas, suggesting that the process of establishing an overseas site can actually cause some of these barriers. 10. Benefits of Doing Business Overseas

10.1 Benefits

All firms were read out 5 possible benefits of doing business overseas, and asked to indicate the extent to which each one applied to them, on a 5 point scale where 5 meant they had benefited ‘to a critical extent’ and 1 meant ‘to no extent’. Please note that firms that had not yet started doing business overseas but were planning to do so in the next year were asked to rate the extent to which they expected to benefit in each of these ways. The chart below summarises these results.

The most widespread benefit of exporting is that it improves firms’ profile or credibility, with 44% rating this as a significant benefit (i.e. scoring 4-5 out of 5) and only 21% indicating that this did not apply to them at all.

The next most common benefits were achieving a level of growth otherwise not possible and being able to more fully utilise existing capacity, which were rated as significant by 41% and 36% of internationalising firms respectively.

Although exposure to new ideas and increased commercial lifespan of products and services were the least widespread export benefits, they were still experienced to a significant extent by approaching a third of firms. The table below provides further analysis of UKTI users and non-users, showing the proportion of firms experiencing each benefit to a significant extent (4-5 out of 5) and to a moderate extent (3-5 out of 5).

Table 10.1.1 Benefits of Overseas Business – By UKTI Usage

| | Total | UKTI Usage | | | |--------------------------------|-------|------------|----------|----------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | Growth | 41% | 56% | 36% | | Utilising capacity | 36% | 49% | 31% | | New ideas | 31% | 41% | 27% | | Increased lifespan | 30% | 35% | 28% | | Profile & credibility | 44% | 57% | 39% | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | Growth | 58% | 73% | 52% | | Utilising capacity | 57% | 69% | 53% | | New ideas | 52% | 63% | 47% | | Increased lifespan | 46% | 56% | 42% | | Profile & credibility | 69% | 80% | 65% | | Summary | | | | | At least one sig. benefit | 63% | 75% | 58% | | At least one mod. benefit | 81% | 91% | 77% | | No sig. or mod. benefit | 19% | 9% | 23% |

It is clear from this analysis that, although they encounter more barriers, UKTI clients also report consistently greater benefits from overseas trade, with 75% experiencing at least one significant benefit compared to 58% of non-users.

This difference between users and non-users is apparent for all of the individual benefits tested. As seen in the bottom table, long-term exporters and those in more markets are considerably more likely to have experienced each of the benefits, which is not surprising given they have had more opportunity to do so. There is some evidence to suggest that the likelihood of seeing significant export benefits also increases amongst larger firms, but this is likely to be linked to their greater export experience.

Table 10.1.2 Benefits of Overseas Business – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | |---------------------|-----------------------------|------|-----|-----|-----|-----|-----|----|----|----| | Up to 5 | | | | | | | | | | | | 6-10 | | | | | | | | | | | | Over 10 | | | | | | | | | | | | 0-9 | | | | | | | | | | | | 10-49 | | | | | | | | | | | | 50-99 | | | | | | | | | | | | 100-249 | | | | | | | | | | | | 250+ | | | | | | | | | | |

Proportion benefiting significantly (4-5 out of 5) from...

| Growth | 42% | 41% | 41% | 38% | 44% | 46% | 45% | 58% | | Utilising capacity | 33% | 36% | 37% | 33% | 39% | 45% | 37% | 49% | | New ideas | 31% | 29% | 31% | 29% | 30% | 35% | 21% | 67% | | Increased lifespan | 33% | 30% | 29% | 30% | 29% | 39% | 18% | 44% | | Profile & credibility | 44% | 44% | 45% | 39% | 48% | 64% | 52% | 67% |

Proportion benefiting moderately (3-5 out of 5) from...

| Growth | 58% | 54% | 60% | 55% | 61% | 68% | 63% | 71% | | Utilising capacity | 53% | 58% | 58% | 53% | 62% | 68% | 50% | 76% | | New ideas | 54% | 48% | 52% | 47% | 55% | 63% | 46% | 84% | | Increased lifespan | 47% | 47% | 46% | 43% | 51% | 56% | 32% | 62% | | Profile & credibility | 69% | 68% | 70% | 65% | 72% | 84% | 80% | 87% |

Summary

At least one sig. benefit | 61% | 59% | 64% | 60% | 63% | 79% | 59% | 84% | At least one mod. benefit | 81% | 80% | 81% | 79% | 82% | 88% | 84% | 96% | No sig. or mod. benefit | 19% | 20% | 19% | 21% | 18% | 12% | 16% | 4% |

Table 10.1.3 Benefits of Overseas Business – By Experience

| Years Exporting | Number of Markets | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | |-----------------|-------------------|-------------------|------------|---------------|--------|------|-------------| | Base | | 198 | 415 | 287 | 441 | 174 | 279 |

Proportion benefiting significantly (4-5 out of 5) from...

| Growth | 33% | 40% | 47% | 29% | 38% | 62% | | Utilising capacity | 31% | 32% | 43% | 25% | 39% | 52% | | New ideas | 31% | 28% | 32% | 25% | 28% | 41% | | Increased lifespan | 26% | 30% | 32% | 24% | 25% | 41% | | Profile & credibility | 44% | 41% | 48% | 32% | 42% | 63% |

Proportion benefiting moderately (3-5 out of 5) from...

| Growth | 52% | 53% | 66% | 45% | 56% | 79% | | Utilising capacity | 53% | 55% | 62% | 46% | 59% | 72% | | New ideas | 55% | 49% | 53% | 47% | 49% | 60% | | Increased lifespan | 45% | 45% | 48% | 37% | 42% | 62% | | Profile & credibility | 72% | 65% | 74% | 60% | 72% | 81% |

Summary

At least one sig. benefit | 58% | 58% | 69% | 51% | 61% | 80% | At least one mod. benefit | 80% | 79% | 84% | 74% | 83% | 90% | No sig. or mod. benefit | 20% | 21% | 16% | 26% | 17% | 10% | There is also a clear correlation between the number of overseas regions firms are active in and the extent to which they benefit from doing business overseas.

However, it is interesting to note that firms that are not currently in any overseas markets (i.e. not yet exporting) are anticipating a much higher level of benefit than that reported by most firms that are already internationalising. This might suggest that some of these firms have unrealistic expectations in respect to the potential impact of exporting on their business. That said, it is clear the many firms do experience this level and range of benefits, but the analysis suggests that this is more likely to happen when firms are active in more markets/regions (i.e. it may well take some time for these new exporters to see the level of benefit they are expecting).

In particular, firms that are not yet exporting are very likely to anticipate benefiting from exposure to new ideas, with 51% believing they will benefit to a significant extent from this. It may well be that some of these firms have already been exposed to new ideas during the process of preparing to start exporting (e.g. attending tradeshows, going on market visits, etc).

Table 10.1.4 Benefits of Overseas Business – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |-------------------------------------|------|-----|-----|-------|------|------| | **Base** | 61 | 224 | 168 | 164 | 126 | 157 | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | | | | Growth | 45% | 26% | 31% | 36% | 52% | 67% | | Utilising capacity | 38% | 25% | 30% | 34% | 41% | 55% | | New ideas | 51% | 18% | 27% | 29% | 30% | 45% | | Increased lifespan | 38% | 19% | 26% | 24% | 34% | 46% | | Profile & credibility | 58% | 32% | 35% | 39% | 51% | 64% | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | | | | Growth | 70% | 42% | 47% | 58% | 64% | 82% | | Utilising capacity | 68% | 43% | 52% | 55% | 65% | 74% | | New ideas | 73% | 39% | 51% | 51% | 47% | 65% | | Increased lifespan | 67% | 29% | 40% | 42% | 55% | 65% | | Profile & credibility | 85% | 56% | 66% | 68% | 76% | 81% | | Summary | | | | | | | | At least one sig. benefit | 78% | 47% | 54% | 63% | 66% | 83% | | At least one mod. benefit | 92% | 71% | 79% | 80% | 84% | 91% | | No sig. or mod. benefit | 8% | 29% | 21% | 20% | 16% | 9% | The following table provides analysis by the various innovation measures, and clearly demonstrates that innovative and IP active firms experience the greatest benefits from overseas trade.

This is illustrated by the fact that almost a third of non-innovative firms (31%) do not report any moderate or significant benefits from their overseas activity, compared to just 1 in 10 of those firms that are classified as being innovative by the alternative, tighter definition.

Table 10.1.5 Benefits of Overseas Business – By Innovation

| | Innovative | IP Active | |----------------------|------------|-----------| | | Yes (alt) | Yes | No | Yes | No | | **Base** | 421 | 643 | 260 | 204 | 685 | | **Proportion benefiting significantly (4-5 out of 5) from...** | | | | | | | Growth | 51% | 46% | 30% | 58% | 37% | | Utilising capacity | 45% | 40% | 28% | 51% | 32% | | New ideas | 40% | 35% | 20% | 46% | 25% | | Increased lifespan | 39% | 34% | 18% | 39% | 27% | | Profile & credibility| 56% | 49% | 33% | 61% | 39% | | **Proportion benefiting moderately (3-5 out of 5) from...** | | | | | | | Growth | 69% | 64% | 43% | 72% | 54% | | Utilising capacity | 67% | 63% | 44% | 71% | 53% | | New ideas | 62% | 58% | 34% | 68% | 46% | | Increased lifespan | 59% | 52% | 30% | 63% | 41% | | Profile & credibility| 80% | 74% | 57% | 83% | 65% | | **Summary** | | | | | | | At least one sig. benefit | 72% | 66% | 53% | 75% | 59% | | At least one mod. benefit | 90% | 85% | 69% | 89% | 78% | | No sig. or mod. benefit | 10% | 15% | 31% | 11% | 22% | As seen below, firms with more ambitious growth objectives also report greater benefits, suggesting that the benefits generated from overseas business might be acting as a catalyst for their growth plans.

Innovative high growth firms are particularly likely to experience significant export benefits, confirming that UKTI should be targeting this key subset of internationalising firms.

Table 10.1.6 Benefits of Overseas Business – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base | 102 | 473 | 280 | 232 | 411 | 260 |

Proportion benefiting significantly (4-5 out of 5) from...

| | Growth | Utilising capacity | New ideas | Increased lifespan | Profile & credibility | |----------------------|--------|--------------------|-----------|--------------------|-----------------------| | Growth | 33% | 29% | 22% | 20% | 36% | | Utilising capacity | 39% | 35% | 28% | 28% | 43% | | New ideas | 53% | 48% | 43% | 41% | 56% | | Increased lifespan | 55% | 50% | 44% | 43% | 58% | | Profile & credibility| 41% | 35% | 31% | 30% | 44% |

Proportion benefiting moderately (3-5 out of 5) from...

| | Growth | Utilising capacity | New ideas | Increased lifespan | Profile & credibility | |----------------------|--------|--------------------|-----------|--------------------|-----------------------| | Growth | 43% | 48% | 37% | 36% | 63% | | Utilising capacity | 60% | 58% | 51% | 45% | 69% | | New ideas | 68% | 65% | 65% | 59% | 78% | | Increased lifespan | 70% | 68% | 67% | 62% | 80% | | Profile & credibility| 61% | 60% | 54% | 48% | 72% |

Summary

| | At least one sig. benefit | At least one mod. benefit | No sig. or mod. benefit | |----------------------|---------------------------|---------------------------|-------------------------| | Growth | 55% | 74% | 26% | | Utilising capacity | 61% | 82% | 18% | | New ideas | 75% | 87% | 13% | | Increased lifespan | 77% | 88% | 12% | | Profile & credibility| 62% | 84% | 16% | | | 53% | 69% | 31% | As seen below, firms demonstrating ‘new’ or ‘sustained’ growth via the ASBS definitions (and particularly ‘new’ growth) are particularly likely to have experienced significant benefits from doing business overseas.

Table 10.1.7 Benefits of Overseas Business – By Growth

| | ASBS Definition | OECD Definition | |------------------------|-----------------|-----------------| | | Sustained | Contained | New | No growth | High growth | Gazelles | | Base | 120 | 128 | 160 | 495 | 112 | 38 | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | | | | Growth | 54% | 47% | 52% | 34% | 48% | 42% | | Utilising capacity | 51% | 34% | 46% | 31% | 46% | 37% | | New ideas | 41% | 31% | 44% | 24% | 38% | 21% | | Increased lifespan | 40% | 33% | 42% | 23% | 41% | 37% | | Profile & credibility | 55% | 52% | 57% | 37% | 50% | 50% | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | | | | Growth | 65% | 60% | 71% | 53% | 63% | 63% | | Utilising capacity | 64% | 56% | 66% | 54% | 60% | 45% | | New ideas | 63% | 47% | 66% | 46% | 57% | 45% | | Increased lifespan | 59% | 48% | 60% | 39% | 59% | 55% | | Profile & credibility | 78% | 72% | 78% | 64% | 74% | 76% | | Summary | | | | | | | | At least one sig. benefit | 72% | 63% | 77% | 56% | 68% | 61% | | At least one mod. benefit | 84% | 81% | 89% | 78% | 83% | 84% | | No sig. or mod. benefit | 16% | 19% | 11% | 22% | 17% | 16% | Firms that were classified as ‘born global’ using the alternative, tighter definition report consistently higher benefits and 88% of this group have experienced at least one significant benefit. This difference is particularly apparent when it comes achieving a level of growth otherwise not possible.

Interestingly, when the standard definition of ‘born global’; is used (i.e. based solely on when firms started exporting and not taking account of export turnover), there is no difference between ‘born global’ firms and other young firms that started doing business overseas at some point after they were established.

‘Young technology intensive’ firms also tend to experience greater benefits than other internationalising firms.

Table 10.1.8 Benefits of Overseas Business – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 234 | 128 | 52 | 124 | 667 | | Proportion benefiting significantly (4-5 out of 5) from... | | | | | | Growth | 41% | 45% | 73% | 54% | 41% | | Utilising capacity | 33% | 34% | 52% | 43% | 37% | | New ideas | 31% | 34% | 46% | 38% | 31% | | Increased lifespan | 33% | 34% | 56% | 44% | 29% | | Profile & credibility| 44% | 42% | 63% | 58% | 44% | | Proportion benefiting moderately (3-5 out of 5) from... | | | | | | Growth | 58% | 63% | 88% | 67% | 58% | | Utilising capacity | 53% | 52% | 75% | 60% | 58% | | New ideas | 54% | 55% | 71% | 61% | 51% | | Increased lifespan | 47% | 50% | 75% | 56% | 46% | | Profile & credibility| 69% | 69% | 85% | 77% | 69% | | Summary | | | | | | At least one sig. benefit | 61% | 61% | 88% | 73% | 63% | | At least one mod. benefit | 80% | 82% | 96% | 86% | 81% | | No sig. or mod. benefit | 20% | 18% | 4% | 14% | 19% | 10.2 Impact on Product & Service Development

All firms were asked whether their experiences of doing business overseas had led them to develop any new products/services or modify any existing ones, with the following results.

Well over half of internationalising firms (59%) reported some degree of impact on their product or service development activity, with 44% indicating that doing business overseas had prompted them to develop new products or services and 52% that it had encouraged them to change or modify existing products or services.

As seen below, UKTI users are significantly more likely to have introduced new or modified products or services as a direct result of their overseas activity.

Where the impact on product/service development related to changing or modifying existing products, in most cases this was felt to be a fundamental change rather than just cosmetic changes (such as packaging or translation), and this is true of both users and non-users.

| Table 10.2.1 Impact On Product/Service Development – By UKTI Usage | |---------------------------------------------------------------| | **Total** | **UKTI Usage** | | **Base** | **Total** | **UKTI User** | **Non-User** | | Develop new products/services | 903 | 248 | 655 | | Change/modify existing ones | 44% | 53% | 40% | | - Something cosmetic | 22% | 64% | 47% | | - Something more fundamental | 39% | 50% | 34% | | Neither | 41% | 29% | 45% | | Don’t know | 1% | 1% | 1% | Small firms with less than 10 employees are least likely to have developed or modified their products or services, but there is no difference in this respect by age of firm.

Table 10.2.2 Impact On Product/Service Development – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Develop new products/services | Change/modify existing ones | - Something cosmetic | - More fundamental | Neither | Don't know | |---------------------|-----------------------------|------|-------------------------------|-----------------------------|---------------------|-------------------|---------|------------| | | Up to 5 | 236 | 46% | 50% | 23% | 37% | 42% | 0% | | | 6-10 | 256 | 41% | 55% | 21% | 40% | 39% | 1% | | | Over 10 | 411 | 45% | 51% | 22% | 39% | 41% | 1% | | | 0-9 | 536 | 41% | 48% | 21% | 36% | 45% | 1% | | | 10-49 | 251 | 48% | 51% | 25% | 37% | 38% | 1% | | | 50-99 | 45 | 47% | 64% | 22% | 53% | 34% | 0% | | | 100-249 | 31 | 46% | 57% | 27% | 48% | 37% | 0% | | | 250+ | 23 | 58% | 80% | 22% | 67% | 16% | 4% |

As expected, innovative and IP active firms are significantly more likely to report an impact of overseas business on their product or service development activity.

Table 10.2.3 Impact On Product/Service Development – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Develop new products/services | 59% | 52% | 24% | 62% | 39% | | Change/modify existing ones | 66% | 61% | 27% | 73% | 45% | | - Something cosmetic | 27% | 27% | 11% | 31% | 20% | | - More fundamental | 54% | 46% | 20% | 58% | 33% | | Neither | 26% | 31% | 65% | 22% | 47% | | Don't know | 0% | 1% | 2% | 1% | 1% |

Firms with substantial growth aspirations are significantly more likely to have developed new products or services and made fundamental changes to existing ones. This might suggest that ambitious firms are more open to tailoring their offering to market requirements in order to help them realise their growth potential.

Table 10.2.4 Impact On Product/Service Development – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Innovative | Non innovative | | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Develop new products/services | 25% | 43% | 58% | 54% | 42% | 16% | | Change/modify existing ones | 29% | 52% | 65% | 61% | 51% | 21% | | - Something cosmetic | 13% | 23% | 29% | 21% | 19% | 8% | | - More fundamental | 19% | 37% | 53% | 49% | 38% | 16% | | Neither | 65% | 40% | 26% | 31% | 41% | 72% | | Don't know | 0% | 1% | 1% | 0% | 1% | 1% | Firms that are defined as ‘born global’ by the alternative definition are particularly likely to have developed new products/services or modified existing ones, and ‘young technology intensive’ firms are also more likely to have done so.

Table 10.2.5 Impact On Product/Service Development – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | | Base | 234 | 128 | 52 | 124 | 667 | | Develop new products/services | 46% | 46% | 65% | 60% | 43% | | Change/modify existing ones | 50% | 49% | 63% | 61% | 52% | | - Something cosmetic | 23% | 27% | 33% | 31% | 22% | | - More fundamental | 37% | 37% | 48% | 47% | 39% | | Neither | 42% | 41% | 27% | 30% | 41% | | Don’t know | 0% | 0% | 0% | 0% | 1% |

Firms operating in the production sector are more likely to have introduced new products or services as a result of their overseas experiences, and to have made fundamental modifications to their existing offering.

Table 10.2.6 Impact On Product/Service Development – By Sector

| | Production | Services | |----------------------|------------|----------| | Base | 287 | 601 | | Develop new products/services | 50% | 41% | | Change/modify existing ones | 56% | 50% | | - Something cosmetic | 23% | 22% | | - More fundamental | 46% | 35% | | Neither | 34% | 44% | | Don’t know | 1% | 1% |

As seen below, firms with overseas sites and those doing business overseas through licensing, franchising or other contractual arrangements are most likely to report an impact on their product or service development activity (presumably linked to the fact that these modes are more likely to be used by innovative firms).

Table 10.2.7 Impact On Product/Service Development – By Modes Used

| | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |----------------------|----------------|---------------------|--------------------------|---------------| | Base | 784 | 363 | 105 | 194 | | Develop new products/services | 44% | 51% | 63% | 65% | | Change/modify existing ones | 51% | 61% | 74% | 71% | | - Something cosmetic | 22% | 29% | 28% | 37% | | - More fundamental | 38% | 46% | 59% | 59% | | Neither | 41% | 31% | 21% | 19% | | Don’t know | 1% | 1% | 0% | 1% | In cases where overseas business had influenced firms’ product/service development, firms were asked whether this development activity was designed for overseas customers, UK customers or both.

Chart 10.2.2 Geographic Focus Of Product/Service Development

| | Total | UKTI Usage | |----------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Overseas customers | 13% | 14% | 13% | | UK customers | 2% | 3% | 2% | | Both | 38% | 52% | 33% | | Overseas business has not prompted any product/service development | 40% | 30% | 45% | | Don’t know | 0% | 0% | 0% | | Not yet exporting | 6% | 2% | 7% |

In most cases where doing business overseas had influenced product or service development, this activity had been carried out with both the UK market and overseas markets in mind.

As seen below, this is true for both users and non-users of UKTI, although the former are more likely to report any impact on product/service development. As seen below, product/service development tended to be aimed at both UK and overseas customers for production and service sector firms.

Table 10.2.9 Geographic Focus Of Product/Service Development – By Sector

| Sector | Production | Services | |---------------------------------------------|------------|----------| | Base | 287 | 601 | | Overseas customers | 14% | 13% | | UK customers | 2% | 3% | | Both | 45% | 35% | | Overseas business has not prompted any product/service development | 35% | 43% | | Don’t know | 0% | 0% | | Not yet exporting | 3% | 7% |

Those firms that had undertaken product or service development activity specifically for overseas customers were asked why this had been done.

Chart 10.2.3 Reasons For Undertaking Product/Service Development For Overseas Customers

- To comply with regulations or legal requirements overseas: 19%
- To solve technical or practical issues relating to overseas countries: 33%
- To take account of different cultures or consumer preferences overseas: 24%
- In response to specific requests from overseas customers: 40%
- Not done any product/service development for overseas customers: 43%

Base: All respondents (Base, None of these, Don’t know, Not yet exporting) (903, 2%, 0%, 6%)

The main catalysts for undertaking this product or service development activity are specific requests from overseas customers and to solve technical/practical issues that are specific to the market(s) in question. This is consistent with the results from a recent UKTI qualitative study(^\\text{10}) that found that a key driver of innovation was demands from existing or prospective customers (e.g. to amend products to meet

(^{10}) Overseas Business Development Strategies For A Stormy Economic Climate, OMB Research, September 2009 their specific requirements). As seen below, results are also broadly comparable to those seen in the 2010 Internationalisation survey, although there is some evidence that slightly more firms are now carrying out product/service development to solve technical or practical issues relating to particular overseas markets.

Table 10.2.10 Reasons For Undertaking Product/Service Development For Overseas Customers – Over Time

| Reason | Internationalisation Survey | |------------------------------------------------------------------------|-----------------------------| | | 2010 | 2011 | | Base | 902 | 903 | | Comply with regulations etc | 16% | 19% | | Solve technical/practical issues | 25% | 33% | | Different cultures or preferences | 23% | 24% | | Customer requests | 37% | 40% | | None of these | 2% | 2% | | Not done product/service development for overseas customers | 48% | 43% | | Don’t know | 0% | 0% | | Not yet exporting | 4% | 6% |

Reflecting the fact that UKTI users are considerably more likely than non-users to be doing any product or service development activity for overseas customers, they are more likely to undertake innovation activity for each of these reasons.

Table 10.2.11 Reasons For Undertaking Product/Service Development For Overseas Customers – By UKTI Usage

| Reason | Total | UKTI Usage | |------------------------------------------------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Comply with regulations etc | 19% | 27% | 16% | | Solve technical/practical issues | 33% | 45% | 29% | | Different cultures or preferences | 24% | 34% | 20% | | Customer requests | 40% | 54% | 35% | | None of these | 2% | 2% | 2% | | Not done product/service development for overseas customers | 43% | 32% | 47% | | Don’t know | 0% | 0% | 0% | | Not yet exporting | 6% | 2% | 7% | As seen below, production sector firms are more likely than those in the service sector to undertake product or service development to solve technical issues encountered overseas and in response to requests from overseas customers.

Table 10.2.12 Reasons For Undertaking Product/Service Development For Overseas Customers – By Sector

| Sector | Production | Services | |---------------------------------------------|------------|----------| | Base | 287 | 601 | | Comply with regulations etc | 22% | 18% | | Solve technical/practical issues | 39% | 31% | | Different cultures or preferences | 26% | 24% | | Customer requests | 48% | 37% | | None of these | 2% | 2% | | Not done product/service development for overseas customers | 38% | 45% | | Don’t know | 0% | 0% | | Not yet exporting | 3% | 7% |

Firms were also asked a number of questions to ascertain the extent to which internationalisation impacts on investment in product and service development activity. These results are summarised below.

Chart 10.2.4 Impacts On Investment In Product/Service Development

- Prompted you to invest more time and money in product or service development: 42%
- Increased the amount of money you have available to invest in product or service development: 41%
- Increased the return on investment that you get from product or service development: 48%

Base: All respondents (Base, No product/service development) (903, 1%/2%/2%, 31%)

Internationalisation can clearly increase the rewards from innovation activity, with almost half of all firms (48%) reporting that doing business overseas has increased the return they have received from their investment in product or service development. Just over two-fifths believe that doing business overseas has encouraged them to invest more resources in these activities, and that it has enabled them to invest more money in product or service development activity. As seen below, users of UKTI are more likely to report all of these impacts, particularly the increased return on investment on product/service development activity.

Table 10.2.13 Impacts On Investment In Product/Service Development – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Invest more time and money in NPD | 42% | 52% | 38% | | Increase money available for NPD | 41% | 52% | 37% | | Increase ROI in NPD | 48% | 61% | 43% |

The younger a firm is, the more likely they are to have benefited by being able to invest more time and money in innovation activities as a result of doing business overseas. There are also some differences by firm size, with larger firms more likely to indicate that overseas business has increased the return on their product/service development investment and, to a lesser extent, benefit through being able to invest more resources in these activities.

Table 10.2.14 Impacts On Investment In Product/Service Development – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |--------------------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Invest more time and money in NPD | 49% | 43% | 39% | 39% | 42% | 45% | 50% | 49% | | Increase money available for NPD | 42% | 42% | 40% | 41% | 43% | 35% | 40% | 44% | | Increase ROI in NPD | 51% | 49% | 47% | 45% | 49% | 56% | 57% | 67% |

As might be expected, innovative firms and those that are IP active are significantly more likely to indicate that doing business overseas has increased the resources they devote to product/service development, the capital they have available for it and the return they receive.

Table 10.2.15 Impacts On Investment In Product/Service Development – By Innovation

| | Innovative | IP Active | |--------------------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Invest more time and money in NPD | 55% | 49% | 23% | 59% | 36% | | Increase money available for NPD | 55% | 48% | 22% | 56% | 37% | | Increase ROI in NPD | 65% | 58% | 24% | 65% | 43% | These impacts on product/service development investment are most likely to be experienced by firms with substantial growth objectives, and particularly innovative high growth firms.

Table 10.2.16 Impacts On Investment In Product/Service Development – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Invest more time and money in NPD | 20% | 40% | 59% | 62% | 43% | 23% | | Increase money available for NPD | 25% | 41% | 55% | 58% | 44% | 22% | | Increase ROI in NPD | 31% | 48% | 65% | 70% | 52% | 24% |

Firms defined as being ‘born global’ by the alternative, tighter definition and those that are ‘young, technology intensive’ are also more likely to report these product/service development benefits.

Table 10.2.17 Impacts On Investment In Product/Service Development – By Born Global & Young, Tech Intensive

| Up to 5 years old | Total | Born global | Born global (alternative) | Young, tech intensive | Over 5 years old | |-------------------|-------|-------------|---------------------------|----------------------|------------------| | Base | 234 | 128 | 52 | 124 | 667 | | Invest more time and money in NPD | 49% | 48% | 69% | 62% | 40% | | Increase money available for NPD | 42% | 44% | 63% | 56% | 41% | | Increase ROI in NPD | 51% | 52% | 69% | 67% | 48% |

Interestingly, firms operating in the production sector are more likely to indicate that doing business overseas increases the money they have available for innovation activities and the return they see on their investment.

Table 10.2.18 Impacts On Investment In Product/Service Development – By Sector

| Sector | Production | Services | |--------|------------|----------| | Base | 287 | 601 | | Invest more time and money in NPD | 44% | 41% | | Increase money available for NPD | 49% | 37% | | Increase ROI in NPD | 54% | 46% | Firms involved in more advanced internationalisation modes (i.e. not just selling direct) are more likely to report these innovation benefits, and this is particularly true of those involved in contractual arrangements and operating their own overseas sites.

Table 10.2.19 Impacts On Investment In Product/Service Development – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |-----------------------------------|----------------|---------------------|--------------------------|---------------| | Base | 784 | 363 | 105 | 194 | | Invest more time and money in NPD | 42% | 47% | 66% | 63% | | Increase money available for NPD | 42% | 49% | 58% | 62% | | Increase ROI in NPD | 49% | 58% | 69% | 70% | 10.3 Impact of Overseas Sites on UK Employment Levels

Those firms that operated their own overseas sites were asked whether this had impacted on the number of people employed by their company in the UK. These results are summarised below.

Chart 10.3.1 If you had not set up your overseas site(s), do you think that the number of people currently employed by your business in the UK would be...?

- Higher than it is now: 16%
- The same as it is now: 61%
- Lower than it is now: 21%

Base: All operating overseas sites respondents (Base, Don't know) (184, 2%)

At the total level, overseas sites appear to have a slight ‘net positive’ impact on UK employment levels.

Overall, 21% of firms indicated that they would have fewer UK employees if they did not have their overseas site, so the site has enabled them to increase UK staff numbers (presumably by improving the firm’s performance and growth).

In comparison, 16% of firms stated that they would have more UK employees if they did not have their overseas site, suggesting that the overseas jobs have replaced UK jobs.

However, in the majority of cases, having an overseas site has no impact on the firm’s UK staff levels. Firms were also asked to indicate the percentage increase or decrease in UK employee numbers as a result of having their overseas site(s). These results are set out below, along with the mean impact on UK employee numbers, calculated by combining the percentage change in staff levels with the firm’s current UK employee levels.

Table 10.3.1 Impact Of Overseas Sites On UK Employment – By UKTI Usage

| Base: All with overseas sites | Total | UKTI Usage | |------------------------------|-------|------------| | | | UKTI User | Non-User | | Over 75% higher | 0% | 0% | 0% | | 51-75% higher | 1% | 0% | 1% | | 26-50% higher | 3% | 3% | 3% | | 11-25% higher | 4% | 3% | 6% | | Up to 10% higher | 8% | 6% | 10% | | The same as it is now | 61% | 60% | 63% | | Up to 10% lower | 8% | 10% | 7% | | 11-25% lower | 4% | 6% | 2% | | 26-50% lower | 4% | 4% | 5% | | 51-75% lower | 2% | 4% | 0% | | Over 75% lower | 3% | 3% | 3% |

Summary

| UK employees would be higher | 16% | 11% | 20% | | UK employees would be the same | 61% | 60% | 63% | | UK employees would be lower | 21% | 26% | 16% | | Don’t know | 2% | 3% | 1% |

Mean Impact

| Mean number of UK employees | 183 | 257 | 126 | | Mean additional UK employees as result of overseas site(s) | +3.5 | +5.3 | +2.2 |

Amongst UKTI users there is a clear positive impact of overseas sites on UK employment levels, with 26% indicating that they would have fewer UK employees without the site(s) and only 11% claiming that UK staff levels would be higher if they had not set up their overseas site(s). The mean impact is an additional 5 employees per firm.

In contrast, non-users of UKTI are slightly more likely to report a negative impact on UK employment (20%) than a positive one (16%). However, it should be noted that the mean impact is still positive for this group, at an additional 2 employees per firm. The table below provides further analysis of UKTI users and non-users by size of firm. Please note that the bases are quite low when analysing the data at this level, so caution should be exercised when interpreting these results.

Table 10.3.2 Impact Of Overseas Sites On UK Employment – By UKTI Usage & Size

| | UKTI Users | Non-Users | |----------------------|------------|-----------| | | 0-49 emps | 50+ emps | 0-49 emps | 50+ emps | | Base: All with overseas sites | 38 | 42 | 67 | 36 | | Summary | | | | | | UK employees would be higher | 11% | 12% | 22% | 17% | | UK employees would be the same | 66% | 55% | 61% | 64% | | UK employees would be lower | 21% | 31% | 16% | 17% | | Don't know | 2% | 2% | 1% | 2% | | Mean Impact | | | | | | Mean number of UK employees | 18 | 473 | 16 | 330 | | Mean additional UK employees as result of overseas site(s) | +0.9 | +9.2 | -0.3 | +7.2 |

Larger UKTI users are more likely to report a positive impact on UK employment and, unsurprisingly given their larger size, the mean number of jobs created is higher amongst this group.

The table below provides further analysis of UKTI users and non-users by size of firm. Please note that the bases are quite low when analysing the data at this level, so caution should be exercised when interpreting these results.

Table 10.3.3 Impact Of Overseas Sites On UK Employment – By Type Of Site

| | Manufacturing / Assembly | Call Centre | Distribution / Sales Office | Service Delivery | R&D | |----------------------|--------------------------|-------------|-----------------------------|------------------|-----| | Base: All with overseas sites | 46 | 10 | 141 | 85 | 24 | | Summary | | | | | | | UK employees would be higher | 20% | 10% | 18% | 19% | 25% | | UK employees would be the same | 57% | 60% | 59% | 58% | 29% | | UK employees would be lower | 20% | 30% | 21% | 20% | 46% | | Don't know | 4% | 0% | 2% | 4% | 0% | | Mean Impact | | | | | | | Mean number of UK employees | 183 | 142 | 213 | 154 | 137 | | Mean additional UK employees as result of overseas site(s) | +6.2 | +4.6 | +4.4 | +6.9 | +17.1 |

Setting aside the results for call centre and R&D sites due to the low base sizes, there is relatively little difference in the impact on UK employee numbers across the different types of overseas site. As well as assessing the impact on total UK employee numbers, firms with overseas sites were also asked whether having a site had had any impact on the number of degree-level staff employed in the UK. These results are summarised below.

Chart 10.3.2 If you had not set up your overseas site(s), do you think that the number of staff that you employ in the UK that have degree-level qualifications would be...

- Higher than it is now: 11%
- The same as it is now: 74%
- Lower than it is now: 11%

Base: All operating overseas sites respondents (Base, Don't know) (184, 3%)

Overall, there appears to be a neutral impact of overseas sites on the number of highly skilled staff employed, with 11% of firms indicating that they would employ more degree-level staff if they did not have an overseas site, but the same proportion believing that they would employ less.

As seen below, UKTI users are more likely to report a positive impact on degree-level employment but non-users are more likely to report a negative impact.

Table 10.3.4 Impact Of Overseas Sites On Number Of Degree-Level UK Employees – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | **Base: All with overseas sites** | 184 | 80 | 104 | | UK degree-level employees would be higher | 11% | 9% | 13% | | UK degree-level employees would be the same | 74% | 70% | 77% | | UK degree-level employees would be lower | 11% | 16% | 8% | | Don't know | 3% | 5% | 2% | The table below provides further analysis of firms with overseas sites by the type of site(s) they operate. Please note that the bases are fairly low when analysing the data at this level, so caution should be exercised when interpreting these results.

Table 10.3.5 Impact Of Overseas Sites On Number Of Degree-Level UK Employees – By Type Of Site

| Type Of Overseas Site(s) | Manufacturing / Assembly | Call Centre | Distribution / Sales Office | Service Delivery | R&D | |--------------------------|--------------------------|-------------|-----------------------------|------------------|-----| | Base: All with overseas sites | 46 | 10 | 141 | 85 | 24 | | UK degree-level employees would be higher | 7% | 0% | 13% | 11% | 17% | | UK degree-level employees would be the same | 76% | 80% | 72% | 73% | 54% | | UK degree-level employees would be lower | 13% | 20% | 11% | 13% | 29% | | Don't know | 4% | 0% | 4% | 4% | 0% |

Overseas R&D sites are significantly more likely to lead to an increase in the number of degree-level staff in the UK. There are no other statistically significant differences by type of site. 11. Opportunities in Emerging & Fast Growing Markets

11.1 Opportunities in Emerging & Fast Growing Markets

Firms were asked to consider the extent to which they felt that there were opportunities for them in a number of emerging or fast growing markets. For each market, firms were asked to indicate whether they were already doing business there, were very likely to do so in the next 2 years, quite likely to do so or unlikely to do so.

Chart 11.1.1 Opinions On Opportunities In Emerging & Fast Growing Markets

Of these markets, it appears that Saudi Arabia and the UAE represent the best opportunity for internationalising firms, with 23% of firms already doing business there and a further 25% very or quite likely to do so in the next 2 years. This is closely followed by South Africa, India and China.

However, there appears to be comparatively little enthusiasm for doing business in Mexico, with just 13% of firms already active in this market and a further 14% indicating that they may enter it in the next 2 years. Results have been summarised as follows.

| Opportunities In Emerging & Fast Growing Markets - Summary | |-----------------------------------------------------------| | Firms have been defined as ‘already in’ if they... | | • Are already in at least one emerging/fast growing market | | Firms have been defined as being ‘very likely’ if they... | | • Are not already in any of the emerging/fast growing markets | | • But feel they are ‘very likely’ to do business in at least one in the next 2 years | | Firms have been defined as being ‘quite likely’ if they... | | • Are not already in any of the emerging/fast growing markets | | • Do not feel that they are ‘very likely’ to do business in any in the next 2 years | | • But feel they are ‘quite likely’ to do business in at least one in next 2 years | | Firms have been defined as ‘unlikely’ if they... | | • Are not already in any of the emerging/fast growing markets |

When the data is viewed in this way, it shows that approaching half (46%) of internationalising firms are already doing business in at least one of these emerging/fast growing markets. Most of the remainder feel that they are very or quite likely to enter at least one of these markets in the next 2 years.

Chart 11.1.2 Opportunities In Emerging & Fast Growing Markets (Summary)

- Already in: 46%
- Very likely: 15%
- Quite likely: 19%
- Unlikely: 20%

Base: All respondents (Base, Don't know) (903, 1%) As seen below, the majority of UKTI users are already in at least one of these markets, and only 10% feel that they are unlikely to enter one in the next 2 years. In contrast, a quarter of non-users are not in any emerging/fast growing markets and have no intention of entering any.

Table 11.1.1 Opportunities In Emerging & Fast Growing Markets (Summary) – By UKTI Usage

| | Total | UKTI Usage | | | | | | | |------------------|-------|------------|----------|----------|----------|----------|----------|----------| | | | UKTI User | Non-User | | | | | | | Base | 903 | 248 | 655 | | | | | | | Already in | 46% | 59% | 40% | | | | | | | Very likely | 15% | 16% | 14% | | | | | | | Quite likely | 19% | 14% | 21% | | | | | | | Unlikely | 20% | 10% | 24% | | | | | | | Don’t know | 1% | 0% | 1% | | | | | |

Older firms and larger firms are more likely to already be operating in emerging or fast growing markets. However, it is not the case that these markets are only targeted by more established firms, as the majority of firms in the youngest age band (established up to 5 years) and the smallest size band (0-9 employees) are either already doing business in at least one of these areas or feel that it is ‘very likely’ they will enter one in the next 2 years.

Table 11.1.2 Opportunities In Emerging & Fast Growing Markets (Summary) – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | | | | | | | |------------------|---------------------|-----------------------------|----------|----------|----------|----------|----------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Already in | 36% | 41% | 50% | 40% | 50% | 68% | 45% | 76% | | Very likely | 22% | 15% | 12% | 17% | 13% | 8% | 16% | 4% | | Quite likely | 24% | 22% | 17% | 20% | 18% | 14% | 28% | 16% | | Unlikely | 17% | 21% | 20% | 22% | 19% | 10% | 11% | 0% | | Don’t know | 0% | 1% | 1% | 1% | 1% | 0% | 0% | 4% | There is clear evidence that firms tend to enter fast growing markets later in their international life-cycle, with those that have been exporting longest significantly more likely to be operating in these markets. However, around a quarter of those that have been exporting for less than 2 years are already operating in these areas. Unsurprisingly, the more markets a firm is active in, the more likely they are to be doing business in one of these merging/fast growing markets.

Table 11.1.3 Opportunities In Emerging & Fast Growing Markets (Summary) – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 198 | 415 | 287 | 441 | 174 | 279 | | Already in | 26% | 41% | 58% | 21% | 48% | 80% | | Very likely | 23% | 15% | 11% | 14% | 24% | 10% | | Quite likely | 24% | 22% | 15% | 28% | 18% | 8% | | Unlikely | 26% | 21% | 16% | 36% | 10% | 2% | | Don't know | 1% | 1% | 0% | 1% | 0% | 0% |

Similarly, the more overseas regions a firm is active in, the more likely they are to be doing business in any of the emerging or fast growing markets.

Table 11.1.4 Opportunities In Emerging & Fast Growing Markets (Summary) – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |--------------------------------------|------|-----|-----|-------|------|------| | Base | 61 | 224 | 168 | 164 | 126 | 157 | | Already in | 0% | 12% | 31% | 53% | 76% | 84% | | Very likely | 41% | 10% | 17% | 18% | 14% | 8% | | Quite likely | 35% | 29% | 26% | 19% | 6% | 7% | | Unlikely | 21% | 48% | 26% | 9% | 4% | 0% | | Don't know | 2% | 2% | 0% | 0% | 0% | 1% |

There is some suggestion that emerging or fast growing markets are more attractive to innovative and IP active firms. However, even amongst non-innovative firms, half are either already in one of these markets or believe they are ‘very likely’ to enter one in the next 2 years.

Table 11.1.5 Opportunities In Emerging & Fast Growing Markets (Summary) – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Already in | 54% | 49% | 38% | 60% | 41% | | Very likely| 16% | 16% | 11% | 15% | 14% | | Quite likely| 19% | 19% | 21% | 15% | 21% | | Unlikely | 10% | 16% | 29% | 9% | 23% | | Don't know | 1% | 1% | 1% | 1% | 1% | Firms that are planning for growth over the next 5 years are more likely to already be operating in emerging or fast growing markets, which might suggest that their experiences in these markets are driving their growth ambitions.

Table 11.1.6 Opportunities In Emerging & Fast Growing Markets (Summary) – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non-innovative | |-------------------|---------------------|----------------| | Stay same | Moderate growth | Substantial growth | | Base | 102 | 473 | 280 | | Already in | 38% | 47% | 46% | | Very likely | 10% | 14% | 19% | | Quite likely | 21% | 19% | 20% | | Unlikely | 30% | 19% | 13% | | Don't know | 1% | 0% | 0% |

As might be expected, ‘born global’ firms (particularly via the alternative, tighter definition) are more likely to be in these markets than other young firms that internationalised at some point after they were established.

Table 11.1.7 Opportunities In Emerging & Fast Growing Markets (Summary) – By Born Global & Young, Tech Intensive

| Up to 5 years old | Total | Born global | Born global (alternative) | Young, tech intensive | Over 5 years old | |-------------------|-------|-------------|---------------------------|-----------------------|------------------| | Base | 234 | 128 | 52 | 124 | 667 | | Already in | 37% | 48% | 56% | 41% | 47% | | Very likely | 22% | 15% | 15% | 27% | 13% | | Quite likely | 24% | 22% | 17% | 24% | 19% | | Unlikely | 17% | 15% | 12% | 7% | 20% | | Don't know | 0% | 1% | 0% | 1% | 1% |

As seen below, production sector firms are slightly more likely to be operating in fast growing or emerging markets than those in the service sector. In both cases the likelihood of being in these markets increases with export experience.

Table 11.1.8 Opportunities In Emerging & Fast Growing Markets (Summary) – By Sector & Experience

| Production Sector | Services Sector | |-------------------|-----------------| | Total | Total | | Years Exporting | Years Exporting | | Less than 2 | Less than 2 | | 2-10 | 2-10 | | Over 10 | Over 10 | | Base | 287 | 601 | | Already in | 52% | 43% | | Very likely | 15% | 14% | | Quite likely | 15% | 21% | | Unlikely | 17% | 21% | | Don't know | 1% | 1% | 11.2 Influence of Economic Downturn

Firms were asked whether the economic downturn had prompted them to focus more attention on emerging or fast growing markets. The table below shows the proportion indicating that this was the case, at the total level and by UKTI usage.

Table 11.2.1 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By UKTI Usage

| | Total | UKTI Usage | | | | | |------------------|-------|------------|----------|----------|----------|----------| | | Base | UKTI User | Non-User | UKTI User | Non-User | | Base | 903 | 248 | 655 | 28% | 39% | 24% | | Yes | 71% | 39% | 60% | 24% | 39% | 24% | | No | 1% | 1% | 1% | 1% | 1% | 1% |

Over a quarter of internationalising firms have responded to the poor economic climate by focussing more on emerging or fast growing markets, with this proportion rising to 39% amongst UKTI users.

As seen below, there is little difference in this respect by age or size of firm.

Table 11.2.2 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | | | | | | |---------------------|----------------------------|----------|----------|----------|----------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Yes | 29% | 27% | 28% | 27% | 28% | 30% | 32% | 44% | | No | 69% | 73% | 71% | 72% | 71% | 67% | 68% | 51% | | Don't know | 2% | 0% | 1% | 1% | 0% | 4% | 0% | 4% |

There is also little difference by export experience, although firms that are doing business in no more than 5 markets are less likely to indicate that the economic conditions have prompted them to devote more attention to fast growing/emerging markets.

Table 11.2.3 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Experience

| Years Exporting | Number of Markets | | | | | | |-----------------|-------------------|----------|----------|----------|----------|----------| | | Less than 2 years | 2-10 years | Over 10 years | Up to 5 | 6-10 | More than 10 | | Base | 198 | 415 | 287 | 441 | 174 | 279 | | Yes | 31% | 25% | 30% | 23% | 35% | 32% | | No | 67% | 75% | 69% | 76% | 65% | 67% | | Don't know | 2% | 0% | 1% | 1% | 0% | 1% | Innovative and IP active firms are significantly more likely to have increased their focus on emerging and fast growing markets as a result of the recent economic downturn and, as seen previously, these firms were also more likely to already be operating in these markets.

Table 11.2.4 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Innovation

| | Innovative (alternative) | IP Active | |----------------|--------------------------|-----------| | | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Yes | 36% | 32% | 17% | 37% | 26% | | No | 63% | 67% | 82% | 62% | 73% | | Don’t know | 1% | 1% | 1% | 1% | 1% |

Those firms that do not aspire to grow over the next 5 years are generally unlikely to have targeted emerging/fast growing markets as a result of the economic conditions, with only 12% indicating that this has been the case (compared to around a third of those with growth aspirations).

Table 11.2.5 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | Non-innovative | |----------------|-------------------|---------------------|----------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Yes | 12% | 30% | 35% | 36% | 30% | 17% | | No | 86% | 69% | 65% | 63% | 68% | 82% | | Don’t know | 2% | 1% | 0% | 0% | 1% | 1% |

Firms classified as being ‘born global’ by the standard definition are in fact no more likely to be devoting more attention to fast growing markets than other young firms. However, there is some indication that those defined as ‘born global’ via the alternative, tighter definition (whereby over 25% of their turnover has to come from overseas sales) are more likely to be doing so, although this difference is not statistically significant.

Table 11.2.6 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | Born global | Born global (alternative) | Young, tech intensive | | Base | 234 | 128 | 52 | 124 | 667 | 28% | 35% | 33% | | Yes | 29% | 29% | 35% | 33% | 28% | 29% | 35% | 33% | | No | 69% | 69% | 65% | 65% | 71% | 69% | 65% | 65% | | Don’t know | 2% | 2% | 0% | 2% | 1% | 2% | 0% | 2% | There is no difference by sector in terms of the proportion of firms that have devoted more attention to emerging or fast growing markets as a result of the economic downturn.

Table 11.2.7 Whether Devoted More Attention To Emerging & Fast Growing Markets As Result Of The Downturn – By Sector

| | Sector | | | |----------------|-----------------|----------|----------| | | Production | Services | | | Base | 287 | 601 | | | Yes | 29% | 28% | | | No | 70% | 71% | | | Don't know | 1% | 1% | | 12. Difficulties Accessing Finance

All firms were asked whether they had experienced any difficulties in accessing finance over the past 6 months and, if so, whether this had a negative impact on either the scale or scope of their overseas activities or the scale or scope of their product or service development activity.

Chart 12.3.1 Whether Difficulties Accessing Finance In Last 6 Months

A quarter of all internationalising firms claim to have experienced difficulties raising finance in the past 6 months. In most cases this has impacted on both their overseas activities and their product or service development.

As seen below, there has been a fairly dramatic rise in the proportion of firms having difficulty accessing finance, from just 15% in 2010 to 25% in 2011. On the face of it this appears surprising given that in 2010 the UK was in a recession. However, it may be because firms are now more positive about the economic outlook and are looking to expand, and hence more firms are actually seeking out external finance (which has led to an increase in the proportion having difficulty obtaining it).

Table 12.3.1 Whether Difficulties Accessing Finance In Last 6 Months – By UKTI Usage & Over Time

| | 2010 Survey | 2011 Survey | |----------------------|-------------|-------------| | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | **Base** | 902 | 235 | 667 | 903 | 248 | 655 | | **Yes** | 15% | 18% | 14% | 25% | 28% | 24% | | - Negative impact on | 9% | 13% | 8% | 17% | 17% | 17% | | overseas activities | | | | | | | | - Negative impact on | 10% | 13% | 9% | 18% | 19% | 18% | | product/service dev't| | | | | | | | **No** | 83% | 81% | 84% | 73% | 71% | 73% | | Don't know/refused | 2% | 1% | 2% | 3% | 2% | 3% | There is some evidence to suggest that UKTI users were more likely to have difficulty accessing finance in both 2010 and 2011, although it should be noted that these apparent differences are not statistically significant. As seen previously, UKTI users tend to have more ambitious growth objectives, so it may be that they are also more likely to have attempted to obtain finance.

As seen below, younger and smaller firms are significantly more likely to encounter problems raising finance.

Table 12.3.2 Whether Difficulties Accessing Finance In Last 6 Months – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Yes | Negative impact on overseas activities | Negative impact on product/service dev’t | No | Don’t know/refused | |---------------------|-----------------------------|-----|----------------------------------------|------------------------------------------|----|-------------------| | | Up to 5 | 6-10| Over 10 | 0-9 | 10-49| 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Yes | 34% | 28% | 21% | 27% | 26% | 16% | 11% | 9% | | - Negative impact on overseas activities | 24% | 20% | 14% | 20% | 17% | 6% | 7% | 4% | | - Negative impact on product/service dev’t | 25% | 23% | 15% | 22% | 17% | 4% | 7% | 9% | | No | 64% | 70% | 76% | 71% | 71% | 81% | 82% | 87% | | Don’t know/refused | 1% | 1% | 3% | 1% | 3% | 4% | 5% | 4% |

Firms that have been exporting for the least time and those in fewer markets are most likely to experience difficulties obtaining finance, and in the majority of cases this does have a negative impact on their overseas development.

Table 12.3.3 Whether Difficulties Accessing Finance In Last 6 Months – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | | < 2 years | 2-10 years | > 10 years | 0-5 | 6-10 | 10+ | 0 - 10% | 11 - 25% | 26 - 50% | 51% + | | Base | 198 | 415 | 287 | 441 | 174 | 279 | 442 | 122 | 106 | 186 | | Yes | 34% | 27% | 20% | 26% | 27% | 22% | 22% | 35% | 30% | 26% | | - Negative impact on overseas activities | 24% | 18% | 13% | 17% | 21% | 15% | 15% | 24% | 23% | 16% | | - Negative impact on product/service dev’t | 26% | 21% | 13% | 19% | 22% | 16% | 17% | 22% | 23% | 19% | | No | 64% | 71% | 77% | 71% | 71% | 75% | 75% | 65% | 70% | 70% | | Don’t know/refused | 2% | 2% | 3% | 3% | 2% | 2% | 3% | 0% | 0% | 4% | Innovative firms are also significantly more likely to have problems accessing finance than their non-innovative counterparts, and this clearly hampers their product and service development activity.

Table 12.3.4 Whether Difficulties Accessing Finance In Last 6 Months – By Innovation

| | Innovative | IP Active | |----------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Yes | 32% | 27% | 20% | 29% | 24% | | - Negative impact on overseas activities | 22% | 19% | 12% | 20% | 17% | | - Negative impact on product/service dev't | 24% | 20% | 14% | 24% | 17% | | No | 66% | 70% | 78% | 70% | 74% | | Don't know/refused | 2% | 3% | 2% | 1% | 3% |

Interestingly, firms with substantial growth aspirations are most likely to experience difficulties accessing finance, suggesting that this could potentially be a barrier to the realisation of this growth. It is worth noting that 37% of the key group of ‘innovative high growth’ firms have had difficulties raising finance.

Table 12.3.5 Whether Difficulties Accessing Finance In Last 6 Months – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------|-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Yes | 14% | 24% | 34% | 37% | 22% | 20% | | - Negative impact on overseas activities | 6% | 17% | 26% | 28% | 15% | 12% | | - Negative impact on product/service dev't | 9% | 17% | 28% | 30% | 16% | 14% | | No | 83% | 73% | 64% | 62% | 74% | 78% | | Don't know/refused | 3% | 3% | 2% | 1% | 4% | 2% | 13. Marketing Channels

13.1 Channels Used

All respondents were asked whether they used social networking sites and other website to obtain news or information that was relevant to their business. As well as these online channels, respondents were also asked whether they had attended any seminars, tradeshows or conferences in the past year. The chart below summarises the penetration levels for each of these channels, and also provides comparative results from the 2010 Internationalisation Survey.

Chart 13.1.1 Proportion Using Each Channel For Business News/Information

Approaching three-quarters of firms use websites to obtain news or information relevant to their business. Slightly surprisingly, this represents a significant decline from the 82% recorded in 2010.

Around a third use social networking sites for business purposes, which is slightly up on the situation a year ago and may reflect the increasing popularity of sites such as LinkedIn.

Two-thirds of respondents had also attended seminars, tradeshows or conferences in the past year, a similar level to that seen a year ago. There is some evidence that younger firms are more likely to use social networking sites and other websites and also to attend seminars, conferences or tradeshows. There are less consistent differences by firm size, but it does appear that firms with more than 50 employees are more likely to attend events.

Table 13.1.1 Proportion Using Each Channel For Business News/Information – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Websites | Social networking | Seminars, etc | |---------------------|-----------------------------|----------|-------------------|---------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Websites | 76% | 70% | 69% | 72% | 68% | 77% | 67% | 58% | | Social networking | 45% | 37% | 26% | 32% | 30% | 39% | 36% | 22% | | Seminars, etc | 71% | 65% | 64% | 61% | 65% | 88% | 81% | 62% |

Interestingly, firms that are fairly new to overseas business are most likely to be using social networking sites for business purposes, suggesting that this could be an effective route to reaching firms at the point they are starting to develop overseas and hence may be in need of external guidance. There are no consistent differences in website usage by the various export experience measures, but firms that operate in more markets and have a higher proportion of their turnover accounted for by overseas sales are more inclined to attended seminars, conferences and tradeshows.

Table 13.1.2 Proportion Using Each Channel For Business News/Information – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | | < 2 years | 2-10 years | > 10 years | 0-5 | 6-10 | 10+ | 0 - 10% | 11 - 25% | 26 - 50% | 51% + | | Base | 198 | 415 | 287 | 441 | 174 | 279 | 442 | 122 | 106 | 186 | | Websites | 72% | 68% | 73% | 67% | 74% | 72% | 69% | 71% | 73% | 72% | | Social networking | 43% | 34% | 24% | 31% | 22% | 38% | 29% | 36% | 33% | 34% | | Seminars, etc | 67% | 63% | 66% | 58% | 74% | 70% | 61% | 71% | 71% | 71% |

As seen below, innovative and IP active firms are more likely to use each of these channels. This difference is particularly evident when it comes to attendance at seminars, tradeshows and conferences.

Table 13.1.3 Proportion Using Each Channel For Business News/Information – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Websites | 76% | 73% | 63% | 74% | 70% | | Social networking | 38% | 34% | 26% | 39% | 30% | | Seminars, etc | 75% | 70% | 52% | 82% | 60% | Generally, the more ambitious a firm’s growth objectives, the more likely they are to use each of these channels. Two-fifths of ‘innovative high growth’ firms currently use social networking sites for business purposes, suggesting that this may be an effective way of reaching this key subset of internationalising firms.

Table 13.1.4 Proportion Using Each Channel For Business News/Information – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non-innovative | |-------------------|---------------------|----------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | | | Base | 102 | 473 | 280 | 232 | 411 | 260 | | Websites | 60% | 73% | 75% | 76% | 72% | 63% | | Social networking | 19% | 31% | 41% | 40% | 31% | 26% | | Seminars, etc | 50% | 66% | 76% | 79% | 66% | 52% | 13.2 Usefulness

For each media channel used, respondents were asked to rate its usefulness as a source of news or information that is relevant to their business, using a 1-5 scale where 1 meant it was ‘not at all useful’ and 5 meant it was ‘extremely useful’. The chart below summarises these results, showing the proportion of respondents rating each source as ‘useful’ (i.e. 4-5 out of 5). Please note that this analysis is based just on those using each channel.

In terms of their usefulness as a source of business news or information, websites and events are seen as the most beneficial, with around three-fifths of those firms that use them giving a score of 4-5 out of 5 for their usefulness.

Although usage of social networking sites for business purposes has risen slightly over the last year, their perceived usefulness has fallen (with only 38% rating them as useful compared to 45% in 2010). As seen below, as well as being more likely to use social networking sites, younger firms also tend to see them as being more useful.

Table 13.2.1 Usefulness As A Source Of Business News/Information – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base: All using | Websites | Social networking | Seminars, etc | |---------------------|---------------------------|----------------|----------|------------------|--------------| | Up to 5 | | 106-179 | 65% | 47% | 58% | | 6-10 | | 95-180 | 61% | 41% | 54% | | Over 10 | | 107-284 | 62% | 32% | 62% | | 0-9 | | 188-394 | 62% | 39% | 59% | | 10-49 | | 81-170 | 59% | 40% | 59% | | 50-99 | | 17-39 | 69% | 31% | 63% | | 100-249 | | 11-25 | 78% | 25% | 49% | | 250+ | | 5-14 | 77% | 20% | 93% |

A similar situation is seen for recent exporters, who are more likely to view social networking sites as a useful business tool (as well as being more likely to use them). Firms operating in no more than 5 markets are also more positive about social networking sites. In contrast, more experienced exporters tend to be the most enthusiastic about seminars, conferences and tradeshows.

Table 13.2.2 Usefulness As A Source Of Business News/Information – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|-------------------|---------------| | < 2 years | 0-5 | 106-179 | | 2-10 years | 6-10 | 95-180 | | > 10 years | 10+ | 107-284 | | Base: All using | | 188-394 | | Websites | | 81-170 | | Social networking | | 17-39 | | Seminars, etc | | 11-25 | | | | 5-14 |

Although innovative and IP active firms are most likely to use social networking sites, amongst those that do there is no difference in their perceived usefulness between firms that are innovative/IP active and those that are not. However, the former are generally more positive about the usefulness of other websites and events.

Table 13.2.3 Usefulness As A Source Of Business News/Information – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base: All using | 171-327 | 235-477 | 73-166 | 85-166 | 219-483 | | Websites | 67% | 65% | 56% | 62% | 63% | | Social networking | 42% | 38% | 37% | 39% | 38% | | Seminars, etc | 64% | 62% | 50% | 68% | 56% | Generally, the greater a firm's growth ambitions the more likely they are to see each of these channels as being useful. This might suggest that growing forms have a greater need or appetite for external information.

Table 13.2.4 Usefulness As A Source Of Business News/Information – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Innovative | Non-innovative | | | Expect substantial growth | Other | | Stay same | 20-61 | 157-345 | 120-215 | 98-182 | 137-299 | 73-166 | | Moderate growth | 60% | 69% | 70% | 62% | 56% | | Substantial growth| 47% | 47% | 32% | 37% | | Base: All using | 26% | 33% | 47% | 32% | 37% | | Websites | 53% | 60% | 69% | 70% | 62% | | Social networking | 45% | 61% | 61% | 66% | 60% | | Seminars, etc | 45% | 61% | 61% | 66% | 60% | 13.3 Social Networking Sites

As seen previously, 32% of respondents indicated that they currently used social networking sites as a source of business information or news. Those that did not already use these sites for business purposes were asked whether they expected to do so in the next year.

Chart 13.4.1 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year

| | Yes | No | Don't know | |----------------|-----|----|------------| | Already use | 17% | 50%| 2% | | social networking sites for business news or information | 32% | Base: All respondents (Base) (903)

In addition to the 32% of respondents that already use social networking sites for business purposes, a further 17% plan to start doing so in the next year.

As seen below, as well as being more likely to currently use social networking sites, younger firms are also slightly more likely to start doing so in the next year.

Table 13.4.1 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | Yes | No | Don't know | Already use | |---------------------|-----------------------------|------|-----|----|------------|-------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-99 | 100-249 | 250+ | | Base | 236 | 256 | 411 | 536 | 251 | 45 | 31 | 23 | | Yes | 20% | 16% | 16% | 19% | 17% | 10% | 18% | 4% | | No | 33% | 45% | 56% | 47% | 52% | 46% | 42% | 73% | | Don't know | 1% | 2% | 2% | 2% | 1% | 5% | 5% | 0% | | Already use | 45% | 37% | 26% | 32% | 30% | 39% | 36% | 22% | Firms that have started exporting more recently are also more open to the idea of using social networking in the next year (as well as being more likely to already do so). There are no consistent differences in this respect by the number of markets firms are active in or their export turnover.

Table 13.4.2 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Experience

| Years Exporting | Number of Markets | % of Turnover | |-----------------|------------------|--------------| | < 2 years | 2-10 years | > 10 years | | Base | 198 | 415 | 287 | | Yes | 22% | 17% | 15% | | No | 35% | 46% | 59% | | Don't know | 0% | 2% | 2% | | Already use | 43% | 34% | 24% |

It appears that innovative firms have a greater appetite for social networking sites, with over half either using them already or planning to do so in the next year (compared to two-fifths of non-innovative firms).

Table 13.4.3 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 421 | 643 | 260 | 204 | 685 | | Yes | 17% | 18% | 14% | 18% | 17% | | No | 44% | 46% | 58% | 40% | 52% | | Don't know | 1% | 2% | 2% | 3% | 1% | | Already use| 38% | 34% | 26% | 39% | 30% |

Broadly speaking, the more ambitious a firm’s growth objectives are, the more likely they are to be using or planning to use social networking sites for business purposes.

Table 13.4.4 Whether Expect To Use Social Networking Sites For Business Purposes In The Next Year – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | Stay same | Innovative | | Moderate growth | Expect substantial growth | | Substantial growth| Other | | Base | 102 | 232 | 411 | 260 | | Yes | 14% | 19% | 17% | 14% | | No | 66% | 40% | 49% | 58% | | Don't know | 1% | 1% | 2% | 2% | | Already use | 19% | 40% | 31% | 26% | Annex A – Markets Selected (For Drivers & Barriers Questions)

For the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’
- Firms that were just considering overseas business were asked to select the country they were ‘likely to do business in first’
- Firms that operated overseas sites were asked to restrict their market choice to one of the markets where they had a site

The table below gives details of the market selected by users and non-users of UKTI.

Table A.1 Market Selected – By UKTI Usage

| Country | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | USA | 15% | 18% | 14% | | France | 8% | 6% | 9% | | China | 6% | 8% | 5% | | Germany | 6% | 5% | 6% | | India | 5% | 8% | 4% | | United Arab Emirates | 4% | 5% | 4% | | Ireland (Republic) | 3% | 1% | 4% | | Russia | 3% | 4% | 2% | | Spain | 3% | 3% | 4% | | Africa | 2% | 2% | 2% | | Australia | 2% | 2% | 3% | | Holland | 2% | 1% | 2% | | Italy | 2% | 1% | 2% | | Japan | 2% | 3% | 1% | | Nigeria | 2% | 2% | 2% | | Poland | 2% | 2% | 1% | | Saudi Arabia | 2% | 2% | 2% | | Belgium | 1% | 0% | 1% | | Brazil | 1% | 0% | 1% | | Canada | 1% | 2% | 1% | | Czech Republic | 1% | 1% | 1% | | Denmark | 1% | 1% | 1% | | Egypt | 1% | 1% | 1% | | Finland | 1% | 1% | 1% | | Greece | 1% | 1% | 1% | | Country | Total | UKTI Usage | |-------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 903 | 248 | 655 | | Hong Kong | 1% | 1% | 1% | | Israel | 1% | 2% | 1% | | Kuwait | 1% | 1% | 1% | | Libya | 1% | 2% | 0% | | Malaysia | 1% | 0% | 1% | | Middle East (unspecified)| 1% | 1% | 1% | | Norway | 1% | 1% | 1% | | Portugal | 1% | 1% | 0% | | South Africa | 1% | 1% | 1% | | South Korea | 1% | 0% | 1% | | Sweden | 1% | 0% | 1% | | Switzerland | 1% | 0% | 1% | | Turkey | 1% | 2% | 1% | | Argentina | 0% | 1% | 0% | | Bangladesh | 0% | 1% | 0% | | Belarus | 0% | 1% | 0% | | Bulgaria | 0% | 1% | 0% | | Europe (unspecified) | 0% | 0% | 1% | | Iraq | 0% | 1% | 0% | | Kenya | 0% | 1% | 0% | | Latvia | 0% | 0% | 1% | | Malawi | 0% | 1% | 0% | | Malta | 0% | 1% | 0% | | Pakistan | 0% | 0% | 1% | | Romania | 0% | 0% | 1% | | Singapore | 0% | 1% | 0% | | Tanzania | 0% | 1% | 0% | | Thailand | 0% | 1% | 0% | | Tunisia | 0% | 1% | 0% | | Ukraine | 0% | 1% | 0% | Annex B – Questionnaire OMB RESEARCH LIMITED UKTI – International Business Strategies, Barriers & Awareness Survey 2011 Questionnaire January - March 2011

QUOTAS – CORE SAMPLE (900 INTERVIEWS): • 250 interviews with firms 0-5 years old • 250 interviews with firms 6-10 years old • 400 interviews with firms more than 10 years old • All quotas to run from questionnaire (S7)

QUOTAS – BOOST SAMPLE (100 INTERVIEWS): • 100 interviews with firms with overseas sites (no age quota)

SCREENER

ASK ALL Could I please speak to either the owner or someone responsible for your firm’s strategy in relation to overseas business?

Good morning/afternoon, my name is ... and I am calling on behalf of OMB Research, an independent market research agency. We have been commissioned by UK Trade & Investment and the Department for Business, Innovation & Skills (BIS) to conduct a survey of businesses on the topic of doing business overseas.

IF CORE SAMPLE IF NECESSARY We are interested in talking to firms who are either involved in any form of overseas business activity or who are seriously considering doing business overseas in the next year. This overseas business activity could include selling directly to customers based overseas, selling overseas through agents or distributors, licensing, franchising or joint venturing overseas, or operating your own overseas office or site.

IF BOOST SAMPLE We are interested in talking to UK firms who operate their own overseas offices or sites, in the sense that you have some responsibility or control over them from the UK.

SHOW FOR ALL INTERVIEWER NOTE - YOU MAY TAKE REFERRALS TO ANOTHER SITE WITHIN THE UK.

IF CORE SAMPLE INTERVIEWER NOTE – IF FIRM IS NOT CURRENTLY DOING BUSINESS OVERSEAS, BUT PLANNING DOING SO WITHIN THE NEXT YEAR CONTINUE WITH THE INTERVIEW ON THIS BASIS READ OUT TO ALL This research will cover areas such as your current and planned overseas activities, including the way you go about doing business overseas and any issues you may have faced. It will take around \<IF CORE SAMPLE 15-20 minutes / IF BOOST SAMPLE 20 minutes>, depending on your answers. It doesn't matter how much or how little overseas business you do – we're interested in speaking to a range of firms about their experiences.

AS NECESSARY UKTI is responsible for helping UK firms do business overseas. They want to find out more about how firms are going about overseas business and any difficulties they have. This will help UKTI develop the type of help they offer to UK firms.

AS NECESSARY We are able to offer all businesses taking part in this research an electronic link to a summary report of the research findings (which will be available later this year)

Is it convenient to speak to you now or would you prefer to make an appointment for another time?

ADD IF NECESSARY

- The research is being conducted under the Code of Practice of the Market Research Society, which means that all of the answers you give are strictly confidential and anonymous. Participation in this survey is voluntary.
- The responses of all organisations taking part will be combined into a statistical report
- Your organisation was selected at random from a list of UK businesses held by a commercial list broker
- If you wish to check that OMB Research is a bona fide market research agency, you can contact the Market Research Society on 0500 396999, or call James Murray at OMB Research on 01732 220582 or Heather Booth di Giovanni at UK Trade & Investment on 020 7215 4989.

OFFER EMAIL/FAX REASSURANCE IF NECESSARY

ASK ALL S1 – Can I confirm that you are one of the people best qualified to talk about your company's overseas business activity \<IF BOOST SAMPLE , including any overseas sites that you operate>?

INTERVIEWER NOTE: IF KNOW ALREADY THAT YOU ARE SPEAKING TO THE CORRECT PERSON THEN CODE YES AUTOMATICALLY

REFERRALS CAN BE TAKEN TO ANY UK SITE WHEN THE CONTACT FEELS THAT THERE IS SOMEONE WITHIN THE COMPANY BETTER PLACED TO ANSWER QUESTIONS ON THE TOPIC AREAS OUTLINED

Yes ................................................................. 1 No – take referral and being transferred .................... 2 No – take referral and arrange call back .................... 3 No – refused referral............................................. 4 ASK ALL S2a – Which of the following overseas business activities has your firm been involved in, over the last 5 years? READ OUT – MULTICODE ALLOWED – DO NOT RANDOMISE

AS NECESSARY: Please only include overseas sites if you have some responsibility or control over them from the UK. Do not include sites or companies operated by your parent company or other group companies.

Selling directly to overseas customers ........................................ 1 Selling to overseas customers through agents or distributors ....... 2 Licensing or franchising overseas, or other contractual arrangements such as joint ventures ......................................................... 3 Operating your own overseas site or office .................................. 4 (None of these) ........................................................................... 5 (Don’t know) ............................................................................... 6 – CLOSE

IF BOOST SAMPLE, CLOSE IF CODE 4 IS NOT SELECTED AT S2a

IF OVERSEAS SITE & AT LEAST ONE OTHER MODE (CODE 4 AT S2a AND (CODE 1, 2 OR 3 AT S2a)) S9a – And which of these ways of doing business overseas did your firm do first? Was it...? READ OUT. SINGLE CODE. CATI TO ONLY DISPLAY CODES SELECTED AT S2a

IF OVERSEAS SITE & AT LEAST TWO OTHER MODES (CODE 4 AT S2a AND ((CODES 1&2 AT S2a) OR (CODES 1&3 AT S2a) OR (CODES 2&3 AT S2a) OR (CODES 1, 2 & 3 AT S2a))) UNLESS CODES 5 OR 6 AT S9a S9b – And which did you do next? READ OUT AS NECESSARY. SINGLE CODE. CATI TO ONLY DISPLAY CODES SELECTED AT S2a BUT NOT SHOW CODE SELECTED AT S9a

IF OVERSEAS SITE & THREE OTHER MODES (CODE 4 AT S2a AND (CODES 1, 2 & 3 AT S2a)) UNLESS CODES 5 OR 6 AT S9a OR S9b S9c – And which did you do next? READ OUT AS NECESSARY. SINGLE CODE. CATI TO ONLY DISPLAY CODES SELECTED AT S2a BUT NOT SHOW CODES SELECTED AT S9a & S9b

Selling directly to overseas customers ........................................ 1 Selling to overseas customers through agents or distributors ....... 2 Licensing or franchising overseas, or other contractual arrangements such as joint ventures ......................................................... 3 Operating your own overseas site or office .................................. 4 (Started them all at the same time) ............................................. 5 (Don’t know) ............................................................................... 6

IF NONE AT S2a (CODE 5) S2b – Are you seriously considering starting to conduct overseas business via any of these routes in the NEXT YEAR?

Yes ............................................................................................. 1 No ............................................................................................... 2 - CLOSE (Don’t know) ............................................................................... 3 - CLOSE IF JUST CONSIDERING OVERSEAS BUSINESS (CODE 1 AT S2b) S2c – Which of the following overseas business activities are you planning to become involved in, in the next year? READ OUT – MULTICODE ALLOWED – DO NOT RANDOMISE

Selling directly to overseas customers ........................................ 1 Selling to overseas customers through agents or distributors .... 2 Licensing or franchising overseas, or other contractual arrangements such as joint ventures ................................................................. 3 Operating your own overseas site or office ................................ 4 (None of these) ........................................................................... 5 – CLOSE (Don't know) ............................................................................... 6 – CLOSE

IF ONLY SELL DIRECT (CODE 1 AT S2a & NOT CODES 2-5 AT S2a) S10a – And do you make any sales directly through your website when doing business overseas?

AS NECESSARY: By this I mean sales where the customer places an order on your website and you don't have any other direct contact with them other than sending email confirmation, etc.

Yes ............................................................................................. 1 No ............................................................................................... 2 (Don't know) ............................................................................... 3

IF SELL THROUGH WEBSITE (CODE 1 AT S10a) S10b – And do you only sell to overseas customers directly through your website, or do you sometimes get orders in other ways (e.g. over the phone, face to face, responding to tenders, etc)?

Only sell through the website ...................................................... 1 Use other ways as well ............................................................... 2 (Don't know) ............................................................................... 3

IF HAVE OVERSEAS SITE (CODE 4 AT S2a) S5b – How many overseas sites do you have? READ OUT

One................................................................................. 1 2-5 .................................................................................. 2 6-10 ................................................................................ 3 11-20 .............................................................................. 4 21-50 .............................................................................. 5 More than 50 .................................................................. 6 (Don't know) ........................................................................... 7 (Refused)................................................................................ 8 IF HAVE JUST ONE OVERSEAS SITE OR PLANNING OVERSEAS SITE (CODE 1 AT S5b OR (OR CODE 4 AT S2c & CODE 5 AT S2a))

S5c1 – < IF CODE 4 AT S2c & CODE 5 AT S2a & CODES 1, 2 OR 3 ALSO MENTIONED AT S2c You mentioned operating your own overseas office or site. > Would you say that the MAIN purpose of this site < IF CODE 1 AT S5b is IF CODE 4 AT S2c & CODE 5 AT S2a will be > …? READ OUT – AIM FOR SINGLE CODE BUT MULTI ALLOWED

IF HAVE MORE THAN ONE OVERSEAS SITE (CODES 2-8 AT S5b)

S5c2 – Thinking about all of your overseas sites, do any of these have the following purposes? READ OUT – CODE ALL THAT APPLY

- Manufacturing or assembly ......................... 1
- Call centre .................................................. 3
- Distribution or sales office ............................ 4
- Service delivery ......................................... 6
- Research, product or process development .... 7
- (Don’t know/None of these) ............................ 8 – CLOSE IF ONLY CODE 4 AT S2a/S2c ((S2a=4 & S2a=Not 1, 2 OR 3) OR (S2a=5 & S2c=4 & S2c=Not 1, 2 or 3))

ASK ALL

S6a – And can I just check, < IF CODES 1-4 AT S2a AND CODE 1 AT S5c other than from the manufacturing or assembly site that you’ve just mentioned > have you IMPORTED any goods or services over the last 5 years?

AS NECESSARY By importing I mean the buying in of goods or services from overseas suppliers.

- Yes ........................................................................................................ 1
- No ......................................................................................................... 2
- (Don’t know) ..................................................................................... 3

IF CODE 1 AT S6a

From now on, when I’m asking questions about your overseas business activity please DO NOT include importing \<IF S2a=4, other than through your own overseas site(s)> ASK ALL S7 – And can I just ask, how long ago was your business established in the UK? READ OUT – CLARIFY AS NECESSARY – THIS MEANS WHEN THE BUSINESS IN ITS CURRENT FORM STARTED TRADING AS NECESSARY – IF THE BUSINESS IS A SUBSIDIARY THIS REFERS TO THE SUBSIDIARY IN WHICH YOU WORK

Within the last year ......................................................... 1 Over 1, up to 2 years ago ................................................. 2 Over 2, up to 3 years ago .................................................. 3 Over 3, up to 4 years ago .................................................. 4 Over 4, up to 5 years ago .................................................. 5 Over 5, up to 10 years ago ............................................... 6 Over 10, up to 20 years ago ............................................. 7 Over 20 years ago .......................................................... 8 (Not yet trading) ............................................................... 9 (Don't know) ................................................................. 10 - CLOSE (Refused) ........................................................................ 11 – CLOSE

ASK IF ESTABLISHED 1-2 YEARS (CODES 1-2 AT S7) S7b – Can I just check, has your business actually started trading yet?

Yes ................................................................................. 1 No .................................................................................. 2 (Don't know) ................................................................. 3

ASK ALL H1b – Is the business UK or foreign-owned?

UK-owned ....................................................................... 1 Foreign-owned ............................................................... 2 (Joint UK and foreign-owned) ......................................... 3 (Don't know) ................................................................. 4

READ OUT IF FOREIGN OWNED (CODES 2-3 AT H1b) For the rest of this interview, please just answer about the firm where you work, and not your parent company or any other group companies. So when I ask about your overseas business, please just focus on the overseas activities of your UK firm. ASK ALL S8 – What is the main activity of the business? PROBE FULLY FOR INDUSTRY TYPE - IF MANUFACTURING WHAT TYPE OF MANUFACTURING, IF FINANCIAL SERVICES WHAT KIND AND SO FORTH

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just tell me the activity of your UK firm, not your parent company

A – Agriculture, hunting & forestry ............................................ 1 B – Fishing................................................................................ 2 C – Mining & quarrying ............................................................. 3 D – Manufacturing .................................................................... 4 E – Electricity, gas and water supply......................................... 5 F – Construction ....................................................................... 6 G – Retail, wholesale & repair of motor vehicles ....................... 7 H – Hotels and catering ............................................................. 8 I - Transport, storage and communication............................... 9 J - Financial intermediation (Finance) ....................................... 10 K - Real estate, renting & business activities ............................ 11 L - Public administration and defence ..................................... 12 M – Education ........................................................................... 13 N - Health and social work ....................................................... 14 O - Other community, social & personal service activities ....... 15 Other ...................................................................................... 96 (Don't know) ............................................................................. 97 (Refused).................................................................................. 98

CATI TO INSERT TIME MARKER SECTION A – OVERSEAS BUSINESS ACTIVITY

ASK IF CODES 1-4 AT S2a UNLESS NOT YET TRADING OR ESTABLISHED \<1 YEAR (CODES 1 OR 9 AT S7 OR CODE 2 AT S7b)

A4 – And how long ago did your company start conducting business overseas? READ OUT AS NECESSARY

IF IMPORTER (CODE 1 AT S6a) AS NECESSARY: By this I mean when did you start selling overseas, so please do not include importing \<IF S2a=4, other than through your own overseas site(s)>.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

INTERVIEWER NOTE: IF RESPONDENT SAYS THEY’VE NOT YET STARTED DOING BUSINESS OVERSEAS THEN YOU NEED TO GO BACK TO S2a AND CHANGE TO ‘NONE OF THESE’ & THEN ASK S2b & S2c

CATI TO ONLY SHOW FEASIBLE CODES BASED ON ANSWER TO S7

Within the last year ................................................................. 1 Over 1, up to 2 years ago .......................................................... 2 Over 2, up to 3 years ago .......................................................... 3 Over 3, up to 4 years ago .......................................................... 4 Over 4, up to 5 years ago .......................................................... 5 Over 5, up to 10 years ago ......................................................... 6 Over 10, up to 20 years ago ...................................................... 7 Over 20 years ago ................................................................. 8 (Don’t know) ........................................................................... 10 (Refused) .............................................................................. 11

ASK IF EXPORTING MORE THAN 2 YEARS (A4=3-11)

A15 – Since this time, have you had overseas sales every year or have there been some years where you haven’t made any sales at all to overseas customers?

Overseas sales every year (since started doing business overseas) 1 Some years with no overseas sales ............................................. 2 (Don’t know) ........................................................................... 3 ASK IF CODES 1-4 AT S2a

G5 – Which of the following regions of the world have you done business in \<IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since your were established>? < IF IMPORTER (CODE 1 AT S6a) (but please DO NOT include countries that you have only imported from \<IF S2a=4 , unless this is from your own overseas site(s)>)> READ OUT. CODE ALL THAT APPLY

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just answer about the areas where your UK firm is doing business, but don’t include the activity of your parent company or any other group companies

Europe ............................................................................ 1 North America................................................................. 3 South America or Latin America ...................................... 4 The Middle East or Africa............................................... 6 Asia Pacific ..................................................................... 7 (Don’t know) .................................................................. 9

ASK IF CODES 1-4 AT S2a

A1b – How many overseas countries have you done business in < IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since your were established >, in any form < IF IMPORTER (CODE 1 AT S6a) (although please DO NOT include countries that you have only imported from\<IF S2a=4 , unless this is from your own overseas site(s)>)>? READ OUT

One................................................................................. 2 2-5 .................................................................................. 3 6-10 ................................................................................ 4 11-20 .............................................................................. 5 21-50 .............................................................................. 6 More than 50 .................................................................. 7 (Don’t know) .................................................................. 8 (Refused)........................................................................ 9

IF CODE 2 AT A1b

A2 – Which country was this? WRITE IN

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY) ............................................................ (Don’t know) - CLOSE

ASK IF CURRENTLY EXPORTING (S2a=1-4)

G7 – Over the next 3 years do you expect the number of countries in which you do business to increase, decrease or stay the same?

Increase............................................................................. 1 Decrease ........................................................................... 2 Stay the same................................................................... 3 (Don’t know) .................................................................. 4 IF ONLY ACTIVITY IS A MANUFACTURING/CALL CENTRE OVERSEAS SITE (CODE 4 AT S2a & CODES 1 OR 3 AT S5c & NOT CODES 1-3 AT S2a) A5a – Can I just check, have you made any sales at all to customers in overseas countries in the last year?

Yes ................................................................. 1 No ........................................................................ 2 (Don't know) ...................................................... 3

ASK IF CODES 1-4 AT S2a EXCEPT CODES 2-3 (NO/DON'T KNOW) AT A5a OR NOT YET TRADING (CODE 9 AT S7 OR CODE 2 AT S7b) A5c – In the last financial year, approximately what percentage of your turnover was accounted for by overseas sales? <IF S2a=4 Please include sales made by the overseas sites or subsidiaries that you control from the UK.> READ OUT AS NECESSARY

IF CODE 3 AT S2a AS NECESSARY: Please include any fees received from overseas licensing or franchising deals.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

Up to 5% ................................................................. 1 6 - 10% ................................................................. 2 11 - 15% ............................................................... 3 16 – 25% ............................................................... 4 26 – 50% ............................................................... 5 51 – 75% ............................................................... 6 More than 75% ..................................................... 7 (No overseas sales) .............................................. 10 (Don't know) ....................................................... 8 (Refused) ............................................................ 9

ASK ALL EXCEPT CONSIDERS ONLY (S2a=5 & S2c=1-4) A5d – In a year's time, do you think that the percentage of your turnover accounted for by overseas sales will be higher than it is now, lower or about the same?

Higher ................................................................. 1 Lower ................................................................. 2 About the same .................................................. 3 (Don't know) ....................................................... 4 (Refused) ............................................................ 5

ASK ALL A17a – Is there anyone employed by your company who had significant experience of doing business overseas before they joined your firm?

Yes ................................................................. 1 No ................................................................. 2 (Don't know) ...................................................... 3 IF YES AT A17a A17b – And was this previous experience that they brought with them in terms of...? READ OUT – SINGLE CODE

Business contacts........................................................... 1 Expertise in doing business overseas............................ 2 Or both ........................................................................... 3 (None of these)................................................................ 4 (Don't know) ................................................................. 5

ASK ALL A7 - I’m going to read out some possible benefits of doing business overseas, and I’d like you to tell me whether \<IF EXPORTING (S2a=1-4) each one applies to your business / IF NOT EXPORTING (S2b=1) you would expect to benefit in these ways when you start doing business overseas>. So firstly...

ON EACH OF THE A7 SCREENS SHOW (AT TOP): \<IF EXPORTING (S2a=1-4) Has doing business overseas... / IF NOT EXPORTING (S2a=1) Do you think that doing business overseas will...>

ORDER OF STATEMENTS TO BE RANDOMISED

(a) \<IF S2a=1-4 Enabled / IF S2b=1 Enable> you to achieve a level of growth otherwise not possible? (b) \<IF S2a=1-4 Allowed / IF S2b=1 Allow> you to more fully utilise your existing capacity? (c) DELETED (d) \<IF S2a=1-4 Exposed / IF S2b=1 Expose> you to new ideas? (e) \<IF S2a=1-4 Increased / IF S2b=1 Increase> the commercial life span of any of your products or services? (f) \<IF S2a=1-4 Improved / IF S2b=1 Improve> your firms profile or credibility?

Yes ................................................................................. 1 No .................................................................................. 2 (Don't know) ................................................................. 3

ASK FOR EACH OF A7a-f THAT HAS BEEN A BENEFIT. ASK A8 DIRECTLY AFTER EACH A7 STATEMENT A8 - And to what extent do you feel that this \<IF S2a=1-4 has been / IF S2b=1 will be> a benefit of doing business overseas? Please give me a score of 1 to 5, where 1 means to no extent and 5 means to a critical extent. READ OUT AS NECESSARY

1 – To no extent.............................................................. 1 2 .................................................................................... 2 3 .................................................................................... 3 4 .................................................................................... 4 5 - To a critical extent .................................................... 5 (Don't know) ................................................................. 6 ASK ALL A9a – Overall, \<IF S2a=1-4 would you say that your experiences of doing business overseas have led / IF S2b=1 do you think that doing business overseas will lead> you to...? READ OUT. CODE ALL THAT APPLY.

Develop any new products or services.................................................................1 Make changes or modifications to any of your existing products or services.2 (None of these)..................................................................................................3 (Don't know) ......................................................................................................4

IF CHANGED PRODUCTS/SERVICES (CODE 2 AT A9a) C1d – < IF CODES 1-4 AT S2a Were these changes or modifications IF CODE 1 AT S2b Are you expecting these changes or modifications to be > ...? READ OUT - MULTICODE

Something cosmetic such as packaging or translation.... 1 Or something more fundamental......................................................... 2 (None of these).......................................................................................... 3 (Don't know) .............................................................................................. 4

IF CURRENTLY EXPORTING & DEVELOPED OR CHANGED PRODUCTS/SERVICES (S2a=1-4 & A9a=1-2) A9b – \<IF CODES 1 & 2 AT A9a Thinking about both the new products or services you’ve developed and the changes you’ve made to existing products or services, was this / IF JUST CODE 1 AT A9a OR JUST CODE 2 AT A9a And was this product or service development > designed specifically for overseas customers, UK customers or both?

Overseas ................................................................. 1 UK ........................................................................ 2 Both........................................................................ 3 (Don't know) .............................................................. 4

IF OVERSEAS (CODE 1 OR 3 AT A9b) A9c –And did you undertake this for any of the following reasons? READ OUT. CODE ALL THAT APPLY

To comply with specific regulations or legal requirements in overseas countries .. 1 To solve technical or practical issues that related to particular overseas countries 2 To take account of different cultures or consumer preferences overseas .......... 3 In response to specific requests from overseas customers.............................. 4 (None of these) .......................................................................................... 5 (Don't know) .............................................................................................. 6

IF HAVE NOT DEVELOPED OR CHANGED PRODUCTS/SERVICES (CODES 3-4 AT A9a) A9d – Can I just check, does your firm carry out or commission any product or service development? AS NECESSARY: This includes improving existing products or services as well as designing new products or services

Yes ........................................................................................................ 1 No........................................................................................................... 2 (Don't know) .......................................................................................... 3 ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A10 –\<IF S2a=1-4 Has doing business overseas prompted / IF S2b=1 Do you think that doing business overseas will prompt > you to invest more time or money in product or service development?

Yes ................................................................................. 1 No ................................................................................... 2 (Don't know) ................................................................... 3

ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A11 – And \<IF S2a=1-4 has doing business overseas increased / IF S2b=1 do you think that doing business overseas will increase > the amount of money you have available to invest in product or service development?

Yes ................................................................................. 1 No ................................................................................... 2 (Don't know) ................................................................... 3

ASK ALL EXCEPT NOT DOING PRODUCT/SERVICE DEVELOPMENT (I.E. ALL EXCEPT CODES 2-3 AT A9d)

A12 – And in your view, \<IF S2a=1-4 has doing business overseas increased / IF S2b=1 will doing business overseas increase > the return on investment that you get from your product or service development?

Yes ................................................................................. 1 No ................................................................................... 2 (Don't know) ................................................................... 3 ASK IF HAVE/PLANNING OVERSEAS SITE (CODE 4 AT S2a OR CODE 4 AT S2c)

A18 – You mentioned earlier that your business \<IF S5b=1 has an overseas site / IF S5b=2-8 has a number of overseas sites / IF S2c=4 is planning to set up an overseas site>. I'm now going to read out some possible reasons for operating an overseas site, and I'd like you to tell me how important each one is to your business. For each one, please give me a score of 1 to 5, where 1 means it is 'not at all important' and 5 means it is a 'very important reason' for having an overseas site.

So firstly... READ OUT. RANDOMISE ORDER

ON EACH OF THE A18 SCREENS (AT BOTTOM) AS NECESSARY How important is this as a reason for having your own overseas site?

INTERVIEWER NOTE: If respondent says it is not relevant or doesn't apply, then code as ‘1 – not at all important’

(a) Your overseas customers prefer you to have a local presence (b) Operating an overseas site is the best way to access people with the specialist knowledge and skills you require (c) Having an overseas site enables you to overcome import restrictions, avoid import duties or gain other tax advantages. (d) The technical nature of your products or services means that you need an 'on the ground' facility to provide customer support (e) IF S5c=1, 3 OR 7: Your competitors have sites in that market, so you decided to do the same (f) IF S5c=1, 3 OR 7: It enables you to access cheaper resources, such as cheaper wages or cheaper raw materials (g) IF S5c=1, 4, 6 OR 8: It is the best way to build up strong working relationships with your customers in that market (h) IF S5c=1 OR 3: It enables you to offer quicker response times for your customers (i) IF S5c=1: It reduces shipment costs (j) IF S5c=4, 6 OR 8: You always approach overseas markets by setting up an overseas site (k) IF S5c=4, 6 OR 8: You don't want to reduce your profit margins by employing a 'middle man' (l) IF S5c=1, 4, 6, 7 OR 8: It is the best way to protect your intellectual property (m) IF S5c=4, 6 OR 8: It is the best way to ensure quality or customer service (n) IF S5c=7: It is the best way to get the necessary product development done for your customers in that market

1 – Not at all important.................................................... 1 2 .................................................................................... 2 3 .................................................................................... 3 4 .................................................................................... 4 5 – Very important reason .............................................. 5 (Don't know) ................................................................... 6

CATI TO INSERT TIME MARKER SECTION C – DRIVERS OF MARKET

OVERALL B4 FILTER: IF DOING BUSINESS IN MORE THAN ONE MARKET (A1b=3-9)

IF NO OVERSEAS SITE (S2a=NOT4) B4 – Thinking now about all the overseas countries that you have done business in < IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since you were established >, which of these was the most challenging country to do business in? RECORD ONE COUNTRY ONLY

IF MORE THAN ONE OVERSEAS SITE (S2a=4 & S5b=2-8) B4 – Thinking now about all the overseas countries where you have an office or site, which of these has been the most challenging country to do business in? AS NECESSARY: Please only include countries where your overseas site is ultimately controlled from the UK. RECORD ONE COUNTRY ONLY

IF JUST ONE OVERSEAS SITE (S2a=4 & S5b=1) B4 – Thinking now about your overseas office or site, which country is this in? RECORD ONE COUNTRY ONLY

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY) ............................................................ (Non/Don’t know/All equally challenging)

OVERALL B5 FILTER: IF NONE/DON’T KNOW AT B4 OR IF ONLY CONSIDERING EXPORTING (S2b=1)

IF NO OVERSEAS SITE (S2a=NOT4) OR JUST ONE OVERSEAS SITE (S2a=4 & S5b=1) B5 – Which overseas country \<IF B4=NONE/DK have you started doing business in most recently / IF S2b=1 are you likely to do business in first >? RECORD ONE COUNTRY ONLY

IF MORE THAN ONE OVERSEAS SITE (S2a=4 & S5b=2-8) B5 – Of those countries where you have an overseas site, which one have you started doing business in most recently? RECORD ONE COUNTRY ONLY

IF NOT SURE ASK RESPONDENT TO JUST CHOOSE ONE OF THE COUNTRIES THAT THEY DO BUSINESS IN (E.G. THE ONE THEY KNOW MOST ABOUT)

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY) ............................................................

CATI TO ALLOCATE <MARKET> AS FOLLOWS:

- FROM B4: IF MORE THAN ONE MARKET (A1b=3-9) AND MARKET PROVIDED AT B4
- FROM B5: IF MORE THAN ONE MARKET (A1b=3-9) & NONE/DON’T KNOW AT B4
- FROM B5: IF ONLY CONSIDERING EXPORTING (S2b=1)
- FROM A2: IF ONLY ONE MARKET (A1b=2) READ OUT FOR ALL I'd like to ask you some questions now about your < IF S2a=1-4 experience of doing business in / IF S2b=1 plans in relation to > <MARKET>.

IF CODES 1-4 AT S2a UNLESS NOT YET TRADING OR ESTABLISHED \<1 YEAR (CODES 1 OR 9 AT S7 OR CODE 2 AT S7b) OR UNLESS DOING BUSINESS OVERSEAS FOR \<1 YEAR (CODE 1 AT A4) C1a – How long has your firm been doing business in < MARKET >? READ OUT AS NECESSARY – CATI TO ONLY SHOW FEASIBLE CODES BASED ON ANSWER TO A4

IF IMPORTER (CODE 1 AT S6a) AS NECESSARY: Please do not include importing \<IF S2=4 , unless it is from your own site in this country>.

Less than a year ............................................................. 1 Over 1, up to 2 years ...................................................... 2 Over 2, up to 3 years ...................................................... 3 Over 3, up to 4 years ...................................................... 4 Over 4, up to 5 years ...................................................... 5 Over 5, up to 10 years .................................................... 6 Over 10, up to 20 years .................................................. 7 Over 20 years .................................................................. 8 (Don't know) ................................................................... 10 (Refused) ........................................................................ 11

ASK ALL C4 - Please can you tell me the extent to which each of the following applied to you when you were FIRST CONSIDERING doing business in <MARKET>.

Please give me a score of 1 to 5, where 1 means that it is not at all applicable and 5 means that it is completely applicable. So firstly...READ OUT – ROTATE BUT F TO ALWAYS COME DIRECTLY AFTER A

(a) You had received an approach or enquiry from someone in <MARKET> (c) There was someone within your company who already had experience of <MARKET> (f) An existing customer that you were already doing business with requested that you start doing business in <MARKET>

ADD TO SCREEN FOR EACH To what extent did that apply to you when you were FIRST CONSIDERING doing business in < MARKET >?

1 – Not at all applicable................................................... 1 2 .................................................................................... 2 3 .................................................................................... 3 4 .................................................................................... 4 5 – Completely applicable .............................................. 5 (Don't know) ................................................................... 6 ASK IF ONLY DONE BUSINESS IN ONE MARKET (CODE 2 AT A1b) OR IF ONLY USE ONE MODE (ONLY ONE OF CODES 1-4 SELECTED AT S2a)

B9 – Based on what you told me earlier about your overseas business, I believe that you do business in <MARKET> by...

CATI TO LIST ALL OF THE FOLLOWING THAT APPLY

IF S2a=1: Selling direct to customers. IF S2a=2: Selling through agents or distributors. IF S2a=3: Licensing, franchising or other contractual arrangements (such as joint ventures). IF S2a=4: Operating your own site or office in <MARKET>.

Is that correct or do you do business in <MARKET> in any different ways?

Yes – correct ................................................................. 1 No – use different ways ................................................. 2 (Don't know) ................................................................. 3

ASK IF DOING BUSINESS IN >1 MKT & USE MORE THAN 1 MODE (CODES 3-9 AT A1b & MORE THAN ONE OF CODES 1-4 SELECTED AT S2a) OR JUST CONSIDERING OVERSEAS BUSINESS (CODE 1 AT S2b) OR INFO WRONG AT B9 (CODE 2 AT B9)

B7 – In which of the following ways < IF S2a=1-4 have you done / IF S2b=1 are you planning to do > business in <MARKET>? READ OUT – CODE ALL THAT APPLY – DO NOT RANDOMISE

Selling directly to customers in <MARKET> ......................... 1 Selling through agents or distributors in <MARKET> ............. 2 Licensing, franchising or other contractual arrangements such as joint ventures................................................................. 3 Operating your own site or office in <MARKET> ................. 6 (None of these).................................................................. 7 (Don't know) .................................................................... 8

IF OVERSEAS SITE (CODE 6 AT B7)

B8a – Thinking about your site in <MARKET>, which of the following purposes < IF CODES 1-4 AT S2a does IF CODE 1 AT S2b will > it have...? READ OUT. CODE ALL THAT APPLY.

INTERVIEWER NOTE: IF THE FIRM HAS SEVERAL SITES IN THIS COUNTRY ASK THEM THE PURPOSE OF THEIR MOST IMPORTANT SITE

Manufacturing or assembly ......................... 1 Call centre ......................................................... 3 Distribution or sales office......................... 4 Service delivery ............................................. 6 Research, product or process development.... 7 (Don't know/None of these) ......................... 8 IF MORE THAN ONE PURPOSE (MORE THAN ONE CODE SELECTED AT B8a)

B8b – And which of these < IF CODES 1-4 AT S2a is IF CODE 1 AT S2b will be > the MAIN purpose of this site? READ OUT AS NECESSARY. SINGLE CODE.

CATI TO ONLY DISPLAY CODES SELECTED AT B8a (& DON'T KNOW)

- Manufacturing or assembly ......................... 1
- Call centre .................................................. 3
- Distribution or sales office ............................ 4
- Service delivery .......................................... 6
- Research, product or process development .... 7
- (Don't know/None of these) ............................ 8

MODE REFERENCES

M1 - Selling direct (B7=1 OR (S2a=1 & B9=1)) M2 - Selling through agents/distributors (B7=2 OR (S2a=2 & B9=1)) M3 – Licensing, franchising, other contractual (B7=3 OR (S2a=3 & B9=1)) M4 – DELETED M5 – DELETED M6 – Production site ((B7=6 & B8a=1) OR (S5c=1 & B9=1)) M7 – Call centre (B7=6 & B8a =3) OR (S5c=3 & B9=1)) M8 – Sales/service site (B7=6 & B8a =4-6) OR (S5c=4-6 & B9=1)) M9 – R&D site (B7=6 & B8a =7) OR (S5c=7 & B9=1)) M10 – Unknown site (B7=6 & B8a =8) OR (S5c=8 & B9=1)) M11 – Unknown mode (B7=7-8 OR B9=3)

IF M6, 7 OR 9 & NOT M8

C1b – Can I just check, < IF CODES 1-4 AT S2a does your IF CODE 1 AT S2b will this > site in < MARKET > sell any products or services directly to any customers in < MARKET >? READ OUT

- Yes ........................................................................................................ 1
- No ........................................................................................................ 2
- (Don't know) ..................................................................................... 3

CATI TO INSERT TIME MARKER SECTION E – BARRIERS

ASK IF CURRENTLY EXPORTING (S2a=1-4) E1 – I’m now going to read out a list of issues that you may have had to tackle when trying to develop your business in <MARKET>. For each one, please give me a score of 1 to 5 for the extent to which you feel that this has been a difficulty, where 1 means it has ‘not been at all difficult’ and 5 means it has been ‘extremely difficult’.

So firstly... READ OUT ROTATE LIST BUT ALWAYS ASK B, C & D IN ORDER

ON EACH OF THE E1 SCREENS (AT BOTTOM) AS NECESSARY To what extent has this been a difficulty in <MARKET> (where 1 means it has ‘not been at all difficult’ and 5 means it has been ‘extremely difficult’)

INTERVIEWER NOTE: If respondent says it is not relevant or doesn’t apply, then code as ‘1 – Not at all difficult’

(a) Obtaining basic information about doing business in <MARKET> (b) Identifying who to make contact with in the first instance < IF M2-3 or finding a suitable partner > (c) Establishing an initial dialogue with prospective < IF M1, M3, M8, M10, M11 OR YES AT C1b customers or > business partners in <MARKET> (d) Building relationships with key influencers or decision-makers (i) IF M1-3, M8, M10, M11 OR YES AT C1b: A preference on the part of customers in <MARKET> for doing business with firms from <MARKET> AS NECESSARY: For example, where customers in France prefer to buy from French companies rather than UK ones. (k) Finding the necessary management time to devote to doing business in <MARKET> (r) Dealing with legal or tax regulations or standards in <MARKET> (s) Negotiating the culture and language (t) Protecting your intellectual property (w) Ensuring you get paid and enforcing contracts (x) Dealing with customs procedures or paperwork

1 – Not at all difficult ....................................................... 1 2 .................................................................................... 2 3 .................................................................................... 3 4 .................................................................................... 4 5 – Extremely difficult ..................................................... 5 (Don’t know) ................................................................. 6 ASK IF OVERSEAS SITE (M6, 7, 8, 9 OR 10) & PROBLEMS WITH LEGAL & REG ISSUES (CODES 3-5 AT E1r)

E2 – You mentioned that you had experienced problems with legal or tax regulations in <MARKET>. Specifically, did you have difficulty with any of the following? READ OUT. CODE ALL THAT APPLY

Interviewer note: Please read out all 4 options and pause to let the respondent say yes or no after each one.

Obtaining work permits or visas for your staff to relocate to <MARKET> .................. 1 Setting up and registering a company in <MARKET> ............................................... 2 Obtaining planning permission or other permits relating to your site in <MARKET> 3 Other legal or tax issues (SPECIFY) ........................................................................ 95 (Don’t know) ............................................................................................................. 97

ASK IF OVERSEAS SITE (M6, 7, 8, 9 OR 10) & NO/MINIMAL PROBLEMS AT E1d, E1i, E1r, E1s, E1t, E1w or E1x (CODES 1-2 AT E1d OR E1i OR E1r OR E1s OR E1t OR E1w OR E1x)

E3 – Do you think that having your own site in <MARKET> has helped you avoid having problems with \<IF CODE 1 AT MORE THAN ONE OF E1d OR E1i OR E1r OR E1s OR E1t OR E1w OR E1x the following>...?

READ OUT. CATI TO ONLY SHOW STATEMENTS WHERE CODE 1 AT E1. ASK IN SAME ORDER AS AT E1.

ON EACH OF THE E3 SCREENS (AT BOTTOM) AS NECESSARY Do you think that having your own site in <MARKET> has helped you avoid problems with this?

(d) Building relationships with key influencers or decision-makers (i) A preference on the part of customers in < MARKET > for doing business with firms from < MARKET > (r) Dealing with legal or tax regulations or standards in < MARKET > (s) Negotiating the culture and language (t) Protecting your intellectual property (w) Ensuring you get paid and enforcing contracts

Yes, having a site in <MARKET> has helped avoid problems with this.. 1 No .......................................................................................................................... 2 (Don’t know) ........................................................................................................... 3

CATI TO INSERT TIME MARKER SECTION G – DIVERSIFICATION & EMERGING/FAST GROWING MARKETS

READ OUT TO ALL I'm now going to ask you about the extent to which you see there being opportunities for YOUR FIRM in some of the world's fast growing and emerging economies over the next 2 years.

ASK ALL G1 – For each of these countries please could you tell me whether you are already doing business there, you are very likely to, you are quite likely to, or you are unlikely to do business there in the next 2 years.

IF IMPORTER (CODE 1 AT S6a) AS NECESSARY: I'm interested in the likelihood of you selling to these countries, so please do not answer in relation to imports.

So firstly, ... DO NOT ROTATE ORDER

a) Russia b) Turkey c) South Africa d) Saudi Arabia or the United Arab Emirates e) Brazil f) Mexico g) China h) India i) India

AS NECESSARY Are you...?

Already doing business there........................................... 1 Very likely ....................................................................... 2 Quite likely ....................................................................... 3 Or, unlikely to do business there in the next 2 years ...... 4 (Don't know) .................................................................. 5

ASK ALL UNLESS ‘UNLIKELY’ (CODE 4) TO ALL OPTIONS AT G1 G4b – And has the economic downturn prompted you to devote more attention to any of the emerging or fast growing economies I've just mentioned?

Yes .................................................................................. 1 No ................................................................................... 2 (Don't know) ................................................................... 3 ASK ALL G10a – Over the last 6 months, has your business had any difficulties in obtaining finance, either from within the company or from external sources?

Yes ................................................................................. 1 No................................................................................... 2 (Don’t know) .................................................................. 3 (Refused)........................................................................ 4

IF DIFFICULTIES ACCESSING FINANCE (G10a=1) G10e – Have these difficulties obtaining finance had any negative impact on the scale or scope of your <IF S2b=1 planned> overseas activities? SINGLE CODE.

Yes ................................................................................. 1 No................................................................................... 3 (Don’t know) .................................................................. 4

IF DIFFICULTIES ACCESSING FINANCE (G10a=1) G10f – And have these difficulties obtaining finance had any negative impact on the scale or scope of your product or service development activity? SINGLE CODE.

Yes ................................................................................. 1 No................................................................................... 3 (Don’t know) .................................................................. 4

CATI TO INSERT TIME MARKER SECTION F – AWARENESS & NEEDS

I'd now like to ask you some questions about any sources of information or advice you are aware of that are available to help UK firms do business overseas.

ASK ALL F2 – Prior to this interview, had you heard of...? READ OUT

(a) UK Trade & Investment or UKTI (b) The commercial services provided by British embassies and consulates overseas

Yes ................................................................. ................ 1 No................................................................................... 2 (Don't know) ................................................................. 3

IF AWARE OF UKTI (CODE 1 AT F2a) F3a – And has your firm used any of UK Trade & Investment’s services?

Yes ................................................................. ................ 1 No................................................................................... 2 (Don't know) ................................................................. 3

IF AWARE OF POSTS (CODE 1 AT F2b) F3b – And has your firm obtained any business information or advice from any British embassies or consulates overseas?

AS NECESSARY: It doesn’t matter whether or not you had to pay for this, if you have received any information of advice then please answer yes.

Yes ................................................................. ................ 1 No................................................................................... 2 (Tried to but got no help).................................................. 4 (Don't know) ................................................................. 3

IF USED UKTI (CODE 1 AT F3a) F4a – Thinking about all the information or support your firm has received from UK Trade & Investment, have you...? READ OUT. CODE ALL THAT APPLY.

Visited the UKTI website .......................................................... 1 Received one-to-one support from a UKTI advisor ................. 2 Attended an event or overseas mission arranged by UKTI ...... 3 Received any other type of support from UKTI ...................... 4 (Don't know) ........................................................................ 5 IF AWARE OF UKTI BUT NOT USED (CODES 2-3 AT F3a) F4b – As far as you know, have you or anyone else in your firm ever visited the UK Trade & Investment website?

Yes ........................................................................................................... 1 No ........................................................................................................... 2 (Don't know) .......................................................................................... 3

ASK ALL EXCEPT OVERSEAS SITES (SKIP IF S2a=4 OR S2c=4) F2k – And has your firm used Business Link? IF NECESSARY: Business Link is a free business advice and support service, available online and through local advisors

Yes ........................................................................................................... 1 No ........................................................................................................... 2 (Don't know) .......................................................................................... 3

IF USED BL (CODE 1 AT F2k) F2m – Thinking about the information or support you have received through Business Link, was any of this provided...? READ OUT. CODE ALL THAT APPLY

Through their website .............................................................. 1 Over the telephone ................................................................. 2 At a face-to-face meeting with one of their advisors ................. 3 (Other) ..................................................................................... 4 (Don't know) ............................................................................ 5

IF NOT USED BL (CODES 2-3 AT F2k) F2j – Prior to this interview, had you heard of Business Link? IF NECESSARY: Business Link is a free business advice and support service, available online and through local advisors

Yes ........................................................................................................... 1 No ........................................................................................................... 2 (Don't know) .......................................................................................... 3

IF AWARE OF BL BUT NOT USED (F2j=1) F2l – Do you think your firm will use Business Link in future? READ OUT. SINGLE CODE

Yes ........................................................................................................... 1 No ........................................................................................................... 2 (Don't know) .......................................................................................... 5

IF NOT USED BL BUT PLAN TO IN FUTURE (CODE 1 AT F2l) F2n – What would be your preferred method of obtaining help or support from Business Link? Would it be...?

Through their website .............................................................. 1 Over the telephone ................................................................. 2 Face-to-face ............................................................................ 3 (Other) ..................................................................................... 4 (Don't know) ............................................................................ 5 CATI TO INSERT TIME MARKER I’d now like to ask you some questions about your business just to classify your answers for analysis purposes.

**ASK ALL**

**H2a – How many people are currently employed by your business in the UK?**

INTERVIEWER NOTE AS NECESSARY Please include both full and part-time staff.

Write in number (0+): (Don’t know) – PROMPT WITH RANGES (Refused)

**IF DON’T KNOW AT H2a**

**H2b – If you had to estimate, approximately how many people are employed by your business in the UK? READ OUT AS NECESSARY**

No employees................................................................. 1 1-4 ................................................................. 2 5-9 ................................................................. 3 10-19 ................................................................. 4 20-49 ................................................................. 5 50-99 ................................................................. 6 100-199 ................................................................. 7 200-249 ................................................................. 8 250-499 ................................................................. 9 500 or more ............................................................. 10 (Don’t know) ............................................................ 11 (Refused)................................................................. 12

**ASK ALL EXCEPT CODES 1, 2, 3 & 9 AT S7 OR CODE 2 AT S7b**

**H2c – Compared to this time three years ago, would you say that the number of people employed by your company in the UK is now...? READ OUT**

Higher................................................................. 1 Lower................................................................. 2 Or, about the same as it was three years ago............. 3 (Don’t know) ............................................................ 4

**IF HIGHER (CODE 1 AT H2c) & FIGURE GIVEN AT H2a**

**H2d – How many people were employed by your business in the UK three years ago? READ OUT**

INTERVIEWER NOTE AS NECESSARY Please include both full and part-time staff.

Write in number (0+): (Don’t know) (Refused) IF DON'T KNOW/REFUSED AT H2d OR (HIGHER (CODE 1 AT H2c) & NO FIGURE GIVEN AT H2a I.E. DON'T KNOW/REFUSED)

H2e – Over the last three years would you say that the number of people employed by your company in the UK has...? READ OUT

- Increased by more than 75% .................................................... 1
- Increased by between 30-75% .................................................. 2
- Or, increased by less than 30% compared to 3 years ago ....... 3
- (Don't know) ............................................................................. 4

IF HAVE OVERSEAS SITE (CODE 4 AT S2a)

H19a – You mentioned earlier that you operate \<IF S5b=1 your own overseas site / IF S5b=2-8 a number of overseas sites>. If you had not set up \<IF S5b=1 this overseas site / IF S5b=2-8 these overseas sites>, do you think that the number of people currently employed by your business in the UK would be...? READ OUT. SINGLE CODE

- Higher than it is now ......................................................... 1
- Lower than it is now .......................................................... 2
- Or, about the same as it is now ....................................... 3
- (Don't know) ........................................................................ 4

IF UK EMPLOYEES WOULD BE HIGHER (CODE 1 AT H19a)

H19b Approximately how many more people would be employed by your business in the UK if you had not set up \<IF S5b=1 this overseas site / IF S5b=2-8 these overseas sites>? Would you have...? READ OUT. SINGLE CODE

- Up to 10% more UK employees ........................................ 1
- 11-25% more ................................................................. 2
- 26-50% more ................................................................. 3
- 51-75% more ................................................................. 4
- Over 75% more UK employees ...................................... 5
- (Don't know) ........................................................................ 6
- (Refused) ............................................................................ 7

IF UK EMPLOYEES WOULD BE LOWER (CODE 2 AT H19a)

H19c Approximately how much lower would your UK employee numbers be if you had not set up \<IF S5b=1 this overseas site / IF S5b=2-8 these overseas sites>? Would you have...? READ OUT. SINGLE CODE

- Up to 10% fewer UK employees ...................................... 1
- 11-25% fewer ................................................................. 2
- 26-50% fewer ................................................................. 3
- 51-75% fewer ................................................................. 4
- Over 75% fewer UK employees ...................................... 5
- (Don't know) ........................................................................ 6
- (Refused) ............................................................................ 7 IF HAVE OVERSEAS SITE (CODE 4 AT S2a)

H20a – And thinking about the types of people employed by your firm in the UK, if you had not set up \<IF S5b=1 this overseas site / IF S5b=2-8 these overseas sites>, do you think that the number of staff you employ in the UK that have degree-level qualifications would be...? READ OUT. SINGLE CODE

Higher than it is now ....................................................... 1 Lower than it is now ........................................................ 2 Or, about the same as it is now........................................ 3 (Don't know) ................................................................... 4

ASK ALL

H3b –< IF S7=NOT 1 & NOT 9 AND S7b=NOT 2 Can I just ask, what is the current annual turnover of your business? / IF S7=1 OR 9 OR S7b=2 What do you anticipate will be the turnover of your business in the first year of trading?> Would you say it is...? READ OUT

AS NECESSARY By this I mean your annual sales, income or receipts.

IF OVERSEAS SITE (CODE 4 AT S2a): AS NECESSARY: Please include sales from any overseas sites or subsidiaries that you control from the UK.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

£0 ................................................................................. 1 £100,000 or less ............................................................. 2 £100,001 - £500,000....................................................... 3 £500,001 - £2million ....................................................... 4 £2million - £10million ..................................................... 5 £10million - £50million ................................................... 6 More than £50million .................................................... 7 (Don't know) ................................................................... 8 (Refused)........................................................................ 9

ASK ALL EXCEPT CODES 1, 2, 3 & 9 AT S7 OR CODE 2 AT S7b

H3c – Compared to this time three years ago, would you say that your turnover is now ...? READ OUT

Much higher................................................................. 1 A bit higher ................................................................. 2 Lower........................................................................... 3 Or, about the same as it was three years ago............... 4 (Don't know) ............................................................... 5 ASK ALL UNLESS ESTABLISHED IN LAST TWO YEARS (I.E. NOT 1-2 OR 9 AT S7 & NOT CODE 2 AT S7b)

H7a – Have you introduced any new products or services over the last three years?

Yes ................................................................. 1 No ........................................................................ 2 (Don’t know) ..................................................... 3

ASK IF YES AT H7a

H7b - And are these new products or services... READ OUT - SINGLE CODE ADD AS NECESSARY: By completely new I mean that, to the best of your knowledge, they have not been introduced by anyone before you READ OUT – SINGLE CODE

Just new to your business................................................................. 1 New to your industry or sector......................................................... 2 Or, are they completely new to the world ........................................ 3 (Some are just new to the business and some are completely new) ...... 4 (Don’t know) .................................................................................. 5

ASK ALL EXCEPT NO EMPLOYEES (0 AT H2A OR CODE 1 AT H2B) OR CODES 2, 3 OR 4 AT H7b

H4a – Approximately how many of your UK employees are engaged either wholly or partly in R&D activity? READ OUT AS NECESSARY

AS NECESSARY: By R&D I mean ‘research and development’

Zero ................................................................................ 1 One................................................................. 2 2-4 ........................................................................ 3 5-9 ........................................................................ 4 10-19 .................................................................. 5 20-49 .................................................................. 6 50-99 .................................................................. 7 100-199 ................................................................. 8 200-249 ................................................................. 9 250-499 ................................................................. 10 500 or more ............................................................ 11 (Don’t know) ............................................................ 12 (Refused)........................................................................ 13

ASK IF H4a IS CODES 2-11

H4b – Can I just check, are any of these employees involved in activities that could be described as ‘the development of scientific or technical knowledge that is NOT commonly available’?

Yes ................................................................. 1 No ........................................................................ 2 (Don’t know) ..................................................... 3 ASK ALL EXCEPT NO EMPLOYEES (0 AT H2A OR CODE 1 AT H2B) OR CODES 2, 3 OR 4 AT H7b OR CODE 1 AT H4a

H5 – And approximately how many of your UK employees are engaged either wholly or partly in new product or service development? READ OUT AS NECESSARY

Zero ................................................................................ 1 One................................................................................. 2 2-4 .................................................................................. 3 5-9 .................................................................................. 4 10-19 .............................................................................. 5 20-49 .............................................................................. 6 50-99 .............................................................................. 7 100-199 .......................................................................... 8 200-249 .......................................................................... 9 250-499 .......................................................................... 10 500 or more .................................................................... 11 (Don't know) ................................................................... 12 (Refused)........................................................................ 13

ASK ALL EXCEPT CODES 2, 3 OR 4 AT H7b OR (CODE 1 AT H4b & CODES 3-11 AT H4a & CODES 3-11 AT H5)

H6 – In the last year have you commissioned anyone external to your business to conduct any R&D or new product or service development activity for you?

Yes ................................................................................ 1 No ................................................................................... 2 (Don't know) ................................................................... 3

ASK ALL

H8b – Have you either applied for or obtained any patents, trademarks or other legal protection, either in the UK or overseas, for any of your products or services?

Yes ................................................................................ 1 No ................................................................................... 2 (Don't know) ................................................................... 3

IF IP PROTECTION (CODE 1 AT H8b)

N8e – And is this...? READ OUT. CODE ALL THAT APPLY

Patents .............................................................................. 1 Trademarks ...................................................................... 2 Or other legal protection ................................................. 3 (Don't know) ................................................................... 4 IF IP PROTECTION (CODE 1 AT H8b) H8c – And do these relate to the UK, overseas countries or both? SINGLE CODE

AS NECESSARY: Please include all patents, trademarks and other legal protection

UK ................................................................. 1 Overseas .......................................................... 2 Both ................................................................. 3 (Don’t know) .................................................... 4

IF OVERSEAS PATENTS (CODE 1 AT N8e & CODES 2-3 AT H8c) H8d – Does your firm hold any ‘triadic patents’, by which I mean you hold a patent in the US, EU and Japan for the same product or innovation?

INTERVIEWER NOTE: ONLY CODE YES IF SAME PATENT HELD IN ALL THREE MARKETS

Yes ................................................................. 1 No ................................................................. 2 (Don’t know) .................................................... 3 (Refused) ....................................................... 4

ASK ALL H9a – Can I just check, do you have a current, written business plan?

Yes ................................................................. 1 No ................................................................. 2 (Don’t know) .................................................... 3 (Refused) ....................................................... 4

IF BUSINESS PLAN (CODE 1 AT H9a) H9b – And what period does this business plan cover? READ OUT AS NECESSARY

The next year .................................................. 1 2 years .......................................................... 2 3 years .......................................................... 3 Up to 5 years .................................................. 4 Up to 10 years ............................................... 5 More than 10 years ........................................ 6 (Don’t know) .................................................. 7 (Refused) ....................................................... 8 ASK ALL EXCEPT ‘NOT YET TRADING’ (CODE 9 AT S7 OR CODE 2 AT S7b)

H10 – Thinking about your business as a whole, what growth objectives do you have for the business over the next FIVE years? Do you plan to…? READ OUT

- Remain the same size .................................................... 1
- Become smaller .............................................................. 2
- Grow moderately ............................................................ 3
- Grow substantially .......................................................... 4
- (Don’t know) ................................................................. 5
- (Refused) ........................................................................ 6

ASK IF CURRENTLY EXPORTING (S2a=1-4) UNLESS DO NOT SELL TO OVERSEAS CUSTOMERS (I.E. DO NOT ASK IF CODE 2 AT A5a)

H18a – Thinking about your overseas customers, are these…? READ OUT. SINGLE CODE

- Businesses ..................................................................... 1
- Individuals....................................................................... 2
- Or both ........................................................................... 3
- (Other) ............................................................................ 4
- (Don’t know) ................................................................... 5

ASK IF SELL TO BUSINESSES (CODES 1 OR 3 AT H18a)

H18b – And are the businesses that you sell to the ‘end users’ of your products or services or are they part of the supply chain? AS NECESSARY: By ‘part of the supply chain’ I mean that your business customers use or incorporate the products or services that they buy from you into their own products, which they then sell on.

- End users ....................................................................... 1
- Part of supply chain ....................................................... 2
- Both ................................................................................ 3
- (Don’t know) ................................................................... 4

ASK IF SELL TO BUSINESSES & FOREIGN OWNED (CODES 1 OR 3 AT H18a & CODES 2-3 AT H1b)

H18c – And do you sell to other firms within your group, firms that are not part of your group, or both? SINGLE CODE

AS NECESSARY: By ‘your group’ I mean your parent company and any other companies that they own

- Just to firms in the group................................................. 1
- Just to firms not in the group............................................ 2
- Both ................................................................................ 3
- (Don’t know) ................................................................... 4 ASK ALL H21 – As far as you are aware, were any of your company owners, partners or directors born overseas?

Yes ................................................................................. 1 No ..................................................................................... 2 (Don’t know) ................................................................. 3 (Refused) ........................................................................ 4

CATI TO INSERT TIME MARKER SECTION I – MARKETING

ASK ALL I1 – Finally, I'd just like to ask you a few questions about the types of media channels that you personally use and how useful these are to your business. So, do you get news or information that's relevant to your business from either of the following? READ OUT. CODE ALL THAT APPLY. DO NOT RANDOMISE ORDER

Social networking sites ................................................... 8 Other websites ................................................................ 9 (None of these) ............................................................... 10 (Don't know) ................................................................. 11

IF CODE 8 AT I1 I2h – And how useful are social networking sites as a source of news or information that is relevant to your business? Please answer on a scale of 1-5 where 1 is 'not at all useful' and 5 is 'extremely useful'.

1 – Not at all useful ......................................................... 1 2 ..................................................................................... 2 3 ..................................................................................... 3 4 ..................................................................................... 4 5 – Extremely useful ....................................................... 5 (Don't know) ................................................................. 6

IF CODE 9 AT I1 I2i – And how useful are other websites as a source of news or information that is relevant to your business? Please answer on a scale of 1-5 where 1 is 'not at all useful' and 5 is 'extremely useful'.

1 – Not at all useful ......................................................... 1 2 ..................................................................................... 2 3 ..................................................................................... 3 4 ..................................................................................... 4 5 – Extremely useful ....................................................... 5 (Don't know) ................................................................. 6

IF DO NOT USE SOCIAL NETWORKING (I1 IS NOT CODE 8) I3b – Do you expect to use any social networking sites for business purposes within the next year?

Yes ................................................................................. 1 No ................................................................................... 2 (Don't know) ................................................................. 3 ASK ALL I4 – During the last year, have you attended any business seminars, tradeshows or conferences?

Yes ........................................................................................................... 1 No ........................................................................................................... 2 (Don’t know) ..................................................................................... 3

IF CODE 1 AT I4 I5 – How useful do you find these events as a source of information or news that is relevant to your business? AS NECESSARY: Please answer on a scale of 1-5 where 1 is ‘not at all useful’ and 5 is ‘extremely useful’.

1 – Not at all useful ................................................................. 1 2 ............................................................................................. 2 3 ............................................................................................. 3 4 ............................................................................................. 4 5 – Extremely useful ............................................................... 5 (Don’t know) ..................................................................................... 6

CATI TO INSERT TIME MARKER ASK ALL H14 – That’s the end of the interview, thank you very much for taking part. Would you be willing to take part in any future UK Trade & Investment research on this topic? AS NECESSARY If you say ‘yes’ you can always decline at the time if it’s not convenient.

Yes ................................................................................. 1 No ................................................................................... 2 (Don’t know) ................................................................... 3

ASK ALL H17a - We will be producing a summary report of the results from this survey. Would you like us to send you an electronic link to this summary report? READ OUT ADD AS NECESSARY The report will be available later this year.

Yes ................................................................................. 1 No ................................................................................... 2 (Don’t know) ................................................................... 3

IF YES AT H17a H17b - Can I take your e-mail address? AS NECESSARY: This will only be used to email you a link to the report and will not be passed on to anyone else

INTERVIEWER NOTE: PLEASE MAKE SURE YOU RECORD THE EMAIL ADDRESS CORRECTLY, & READ IT BACK TO THE RESPONDENT TO CHECK SPELLINGS ETC

Yes (WRITE IN) .............................................................. 1 No ................................................................................... 2 (Don’t know) ................................................................... 3

IF YES AT H17a BUT RESPONDENT DOESN’T HAVE AN EMAIL ADDRESS H17c – Can I confirm your postal address then and we will send you a letter containing the internet address for the electronic report?

CATI TO INSERT TIME MARKER

ASK ALL H15 – Finally as proof of this interview please could I just confirm your business postcode? CATI TO DISPLAY POSTCODE IF AVAILABLE – AMEND IF MISSING OR INCORRECT

ASK ALL H16 – And may I take a note of your name?

STANDARD THANK & CLOSE